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CPA
Foundation Leval
Introduction to Law and Governance November 2017
Suggested Solutions

Introduction to Law and Governance
Revision Kit

QUESTION 1a

Q With reference to the Sale of Goods Act, or the equivalent law on the sale of goods in your country:

(i) Explain the meaning of the rule "nemo dat quod non habet"
(ii) Discuss exceptions to the rule in (a)(i) above
A

Solution


(i) "Nemo dat quod non habet"

"Nemo dat quod non habet" is a Latin phrase that translates to "no one can give what they do not have." This principle refers to the basic concept that a person cannot transfer better title to goods than they themselves possess. In simpler terms, if someone does not have legal ownership or the right to transfer ownership of goods, they cannot pass on ownership to another person through a sale or any other means.

➦ This rule serves as a fundamental principle of property law and protects buyers from purchasing goods from individuals who do not have valid ownership or the authority to sell those goods.

(ii) Exceptions to the rule "nemo dat quod non habet" can vary depending on the legal jurisdiction.

Exceptions in certain legal systems include:

➧ Sale under estoppel: This exception applies when the true owner of goods has, by their words or conduct, intentionally or negligently caused another person to believe that a third party has the authority to sell the goods. If the third party then sells the goods to a buyer who is unaware of the true owner's rights, the buyer may acquire a good title to the goods. Essentially, the true owner is estopped from denying the seller's authority to transfer ownership because of their own actions or statements.

➢ example, suppose a person entrusts their car to a repair shop for repairs. The repair shop, mistakenly believing that the car owner has authorized them to sell the vehicle, sells it to a buyer in good faith. In this scenario, the buyer may acquire a good title to the car under the principle of estoppel, as the true owner's actions led the buyer to believe that the repair shop had the authority to sell the car.

➧ Sale by buyer in possession: This exception applies when a person buys goods from someone who is not the true owner but is in possession of the goods with the owner's consent. If the buyer acquires the goods in good faith and without knowledge that the seller lacks ownership rights, the buyer may obtain a good title to the goods. This exception is based on the notion that the true owner has implicitly authorized the person in possession to sell the goods.

➢ For instance, let's say a person borrows a valuable painting from its owner and later sells it to a buyer without disclosing that they are not the true owner. If the buyer purchases the painting in good faith, unaware of the true owner's rights, the buyer may acquire a good title to the painting under the exception of sale by buyer in possession. This is because the true owner's consent to the borrower's possession of the painting implies the authority to sell.

➧ Sale by a person in possession: If a person sells goods while in possession of them, even if they are not the legal owner, the buyer may acquire a good title to the goods. This exception applies when the seller has the authority to sell the goods, such as when acting as an agent or having the permission of the true owner.

➧ Sale by a mercantile agent: In some cases, a mercantile agent, who is a person acting in the ordinary course of business as a buyer or seller of goods, may have the power to transfer better title to goods than they themselves possess. This exception typically applies when the agent is acting within the scope of their authority and in good faith.

➧ Sale under a voidable title: If a person sells goods under a voidable title, which is a title that may be subsequently voided or set aside, the buyer may acquire a good title if they are a bona fide purchaser for value without notice of the defect in the seller's title.

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QUESTION 1(b)

Q Ailan Bora, the proprietor of Pesa House, placed a warning sign outside the entrance to the building that the floors of the premises were slippery. Brian Mbiyo, who was in a hurry to attend classes in the building, did not see the notice. As Brian Mbiyo was rushing to class, he slipped, fell and fractured his hand. Brian Mbiyo is now seeking compensation from Allan Boras

Advise Allan Bora on his legal position.
A

Solution


As Allan Bora's legal advisor, based on the scenario presented, here is an assessment of his legal position and potential possibilities:

➧ Warning sign: Allan Bora placed a warning sign outside the entrance to the building, indicating that the floors were slippery. This demonstrates that Allan Bora took reasonable steps to inform individuals about the potential hazard.

➧ Duty of care: As the proprietor of Pesa House, Allan Bora likely owed a duty of care to visitors, which includes maintaining the premises in a reasonably safe condition and providing appropriate warnings about known hazards.

➧ Brian Mbiyo's awareness: Brian Mbiyo claims that he did not see the warning sign due to being in a hurry. This raises the question of whether Allan Bora can be held responsible for Brian Mbiyo's failure to notice the warning sign.

Possible legal positions for Allan Bora:

(a) Argue contributory negligence: Allan Bora may argue that Brian Mbiyo's own actions, such as rushing to class and not paying attention to his surroundings, contributed to the accident and resulting injury. Brian Mbiyo's failure to see the warning sign despite its reasonable placement could be seen as his own negligence or lack of reasonable care.

(b) Assert assumption of risk: Another potential argument is that Brian Mbiyo assumed the risk of potential hazards by choosing to rush and not take reasonable precautions. This defense asserts that individuals have a personal responsibility to exercise caution and be aware of their surroundings.

(c) Review the adequacy of the warning sign: Allan Bora should evaluate the effectiveness and visibility of the warning sign. If the sign was not positioned conspicuously or provided insufficient notice of the slippery floors, it could weaken Allan Bora's defense. Conversely, if the sign was prominently placed and clearly visible, it strengthens the argument that Allan Bora took reasonable steps to warn visitors.

(d) Explore settlement options: Considering the circumstances and potential liability, Allan Bora may wish to explore settlement options with Brian Mbiyo. This would involve negotiating a mutually acceptable resolution without proceeding to litigation.

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QUESTION 2(a)

Q With reference to the law of agency:

(i) Distinguish between a "special agent" and a "general agent'
(ii) Highlight five conditions which must be fulfilled for a principal to effectively ratify the acts of an agent.
(iii) Outline obligations of an agent to the principal.
A

Solution


(i) Distinguishing between a "special agent" and a "general agent":

➦ Special Agent: A special agent is authorized by the principal to perform specific tasks or transactions on their behalf. The authority granted to a special agent is limited in scope and duration. Once the specific task is completed or the agreed-upon transaction is finalized, the agency relationship terminates.

➦ General Agent: A general agent, on the other hand, is authorized by the principal to conduct a series of transactions or manage a specific business or aspect of the principal's affairs. The authority of a general agent is broader and extends beyond specific tasks or transactions. A general agent may have the authority to make decisions and enter into contracts on behalf of the principal within the scope of their agency.

(ii) Conditions for effective ratification of an agent's acts by a principal:
For a principal to effectively ratify the acts of an agent, the following conditions generally need to be fulfilled:

➧ Agent's Act on Behalf of Principal: The agent must have acted on behalf of the principal without actual authority. In other words, the agent must have purportedly acted as an agent, believing they had authority to represent the principal.

➧ Full Knowledge of Material Facts: The principal must have full knowledge of all material facts regarding the agent's act. The principal cannot ratify an act if they were unaware of crucial details or if the act substantially differs from what they intended.

➧ Entire Act Ratified: The principal must ratify the entire act performed by the agent. Partial ratification is generally not permissible, as the principal cannot selectively ratify only certain aspects of the agent's act.

➧ Legal Capacity: The principal must have legal capacity at the time of ratification. This means they must be legally competent and capable of entering into contracts or authorizing the agent's act.

➧ Timeliness: Ratification must occur within a reasonable time period after the principal becomes aware of the agent's act. Delayed ratification may result in the loss of rights or potential legal consequences.

(iii) Obligations of an agent to the principal:

➧ Duty of Loyalty: The agent must act in the best interests of the principal, avoid conflicts of interest, and not engage in any activity that would harm the principal's interests.

➧ Duty of Care and Skill: The agent is required to perform their duties with reasonable care, skill, and diligence, exercising the level of skill expected of someone in their position.

➧ Duty to Follow Instructions: The agent must follow the lawful instructions and directives provided by the principal, as long as they do not conflict with the agent's duty of loyalty or other legal obligations.

➧ Duty to Account: The agent has a duty to provide an accurate account of all transactions, funds, and property related to the agency relationship.

➧ Duty of Confidentiality: The agent must maintain the confidentiality of information received from the principal and not disclose it to third parties without proper authorization or legal requirement.

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QUESTION 2(b)

Q (i) Summarise three basic principles of insurance.
(ii) Explain the meaning of the principle of double insurance.
A

Solution


(i) Three basic principles of insurance:

➧ Principle of Utmost Good Faith (Uberrimae Fidei): Insurance contracts are based on the principle of utmost good faith, which requires both the insured and the insurer to disclose all relevant information honestly and completely. This principle ensures that both parties have access to accurate information to assess the risk and determine appropriate terms and premiums.

➧ Principle of Insurable Interest: Insurable interest refers to the legal or financial interest that a person has in the subject matter of the insurance policy. To be eligible for insurance, the insured must have an insurable interest in the property or the life being insured. This principle ensures that insurance is based on protecting legitimate interests and prevents the potential for speculative or fraudulent insurance.

➧ Principle of Indemnity: The principle of indemnity states that insurance aims to compensate the insured for the actual financial loss suffered and not to provide a source of profit. Under this principle, the insured should be restored to the same financial position they were in prior to the occurrence of the insured event, without gaining any financial advantage from the insurance claim.

(ii) The principle of double insurance:

The principle of double insurance refers to a situation in which the same subject matter is insured against the same risk with multiple insurers. In double insurance, the insured seeks coverage from multiple insurers to mitigate the potential loss more comprehensively.

Elements of the principle of double insurance are:

➧ Overlapping Coverage: The subject matter (property, life, or liability) is insured under two or more separate insurance contracts or policies.

➧ Identical Risk: The risk covered by each policy is the same. This means that the insured event or peril that could cause a loss is identical for all the insurers involved.

➧ Principle of Contribution: According to the principle of contribution, if double insurance exists, the insured cannot claim the full amount from each insurer. Instead, the insured is entitled to claim a proportionate amount from each insurer, up to the actual loss suffered. The total compensation received should not exceed the actual loss suffered by the insured.

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QUESTION 3(a)

Q (i) Explain differences between "hire-purchase sale" and "credit sale"
(ii) Explain duties of the hirer in a hire purchase agreement.
A

Solution


(i) Differences between "hire-purchase sale" and "credit sale":

Hire-Purchase Sale: Credit Sale:
In a hire-purchase sale, the ownership of the goods is initially retained by the seller (the hire-purchase company or the owner) until the hirer (the buyer) fulfills all the payment obligations as per the agreed terms. In a credit sale, ownership of the goods is transferred to the buyer (debtor) immediately upon the completion of the sale, even if the buyer is paying for the goods in installments.
The hirer takes possession and has the right to use the goods during the hire-purchase period, but legal ownership remains with the seller until the final payment is made. The buyer has full ownership rights and assumes all risks and responsibilities associated with the goods from the moment of sale.
The hirer pays regular installments, which typically include both principal and interest components, over a specified period. The buyer makes regular payments to the seller (creditor) for the purchase price, which may include interest charges, but these payments do not affect ownership.
If the hirer defaults on payments, the seller has the right to repossess the goods, as ownership is still retained by the seller until full payment. If the buyer defaults on payments, the seller has the right to pursue legal remedies to recover the outstanding debt, but the seller does not have the right to repossess the goods unless specified in a separate agreement.


(ii) Duties of the hirer in a hire purchase agreement:

➧ Payment of Installments: The hirer has the duty to make regular installment payments as per the agreed terms. These payments usually include the cost of the goods and any interest charges. Failure to make payments can result in default and potential repossession of the goods.

➧ Care and Maintenance: The hirer has a duty to take reasonable care of the goods and maintain them in good condition during the hire-purchase period. This includes following any manufacturer's guidelines for proper use, servicing, and maintenance of the goods.

➧ Insurance: The hirer is often required to obtain and maintain appropriate insurance coverage for the goods, protecting against risks such as damage, loss, or theft. The insurance should be in the name of the hirer and cover the value of the goods.

➧ Non-alteration of Goods: The hirer is generally not allowed to make significant alterations or modifications to the goods without the consent of the seller. Any modifications that impact the value or condition of the goods may require the seller's approval.

➧ Notification of Address or Contact Changes: The hirer has a duty to inform the seller of any changes in their address or contact information. This ensures that the seller can contact the hirer regarding payment reminders, contract updates, or other relevant matters.


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QUESTION 3(b)

Q Many clauses in a contract purport to exclude liability for injury. loss or damage.

Explain five rules which determine the effectiveness of such clauses.
A

Solution


➧ Rule of Construction: Exclusion clauses are construed strictly against the party seeking to rely on them. This means that any ambiguity or uncertainty in the language of the clause is interpreted in favor of the party who would otherwise be subject to liability. The wording of the clause must be clear and unambiguous to effectively exclude liability.

➧ Fundamental Breach: Exclusion clauses are generally not enforceable if they attempt to exclude liability for a party's own fraudulent, willful, or grossly negligent acts. They may also be ineffective if they seek to exclude liability for a fundamental breach of contract. A fundamental breach occurs when a party fails to perform a major or essential obligation under the contract.

➧ Unfair Contract Terms Legislation: Many jurisdictions have legislation that restricts the enforceability of exclusion clauses. Unfair contract terms legislation aims to protect consumers and parties with less bargaining power from unfair and unreasonable contractual terms. Such legislation may render certain exclusion clauses void or unenforceable if they are deemed unfair or unconscionable.

➧ Notice Requirement: In some cases, an exclusion clause may be valid and enforceable if reasonable notice of its existence is given to the other party. Reasonable notice ensures that the party has an opportunity to understand the implications of the clause before entering into the contract. The notice requirement may involve conspicuous placement of the clause, explicit reference to it, or drawing attention to it in a manner that is reasonable and fair.

➧ Public Policy and Statutory Rights: Exclusion clauses cannot exclude or limit liability for certain statutory rights or obligations that are deemed to be of public policy importance. These rights and obligations vary by jurisdiction but often include protections related to personal injury, health and safety, consumer rights, and employment rights. Public policy considerations may render certain exclusion clauses void or unenforceable if they attempt to exclude liability for these protected rights.

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QUESTION 4(a)

Q With reference to the law of intellectual property, discuss four advantages of registering an industrial design.
A

Solution


Registering an industrial design under the law of intellectual property can provide several advantages.

Benefits of registering an industrial design:

➧ Legal Protection: Registering an industrial design grants the owner exclusive legal rights and protection. It provides a legally recognized proof of ownership, preventing others from using, copying, or imitating the design without the owner's permission. In case of infringement, the registered owner can take legal action to enforce their rights and seek remedies.

➧ Commercial Advantage: Registering an industrial design can confer a competitive edge in the marketplace. It allows the owner to differentiate their product from competitors by showcasing the unique and visually appealing features of the design. A registered industrial design may attract customers and increase brand recognition, leading to increased sales and market share.

➧ Economic Value: A registered industrial design can have economic value in terms of licensing, selling, or commercializing the design. The registered owner can potentially license the design to others, granting them permission to use it in exchange for royalties or licensing fees. Moreover, a registered industrial design may have value as an asset, enabling the owner to sell or transfer the design rights to interested parties.

➧ Global Protection: Registering an industrial design can provide protection on an international level. Through international treaties and agreements, such as the Hague System for the International Registration of Industrial Designs, it is possible to seek protection in multiple countries with a single application. This streamlines the process of securing protection in different jurisdictions, making it more convenient and cost-effective for businesses with a global presence.

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QUESTION 4(b)

Q With regard to administrative law:

(i) Explain the term "separation of powers".
(ii) Summarise grounds upon which courts might interfere with the decisions of an administrative body.
A

Solution


(i) "Separation of powers":

Separation of powers is a fundamental principle in constitutional and administrative law that divides the powers and functions of government among separate branches or entities. The three main branches typically recognized are the legislative, executive, and judicial branches. The principle aims to prevent the concentration of power in any single entity and provides a system of checks and balances.

In the context of administrative law, the separation of powers refers to the division of powers between the legislative branch, which enacts laws, the executive branch, which implements and administers the laws, and the judicial branch, which interprets and applies the laws. This separation ensures that administrative bodies, which are part of the executive branch, operate within the confines of the law and are subject to oversight and review by the judiciary.

(ii) Grounds for court interference with administrative decisions:

➧ Procedural Impropriety: Courts may interfere if the administrative body did not follow proper procedures in reaching its decision. This could include failure to give the affected party an opportunity to be heard, biased decision-making, or a failure to provide adequate reasons for the decision.

➧ Error of Law: Courts may intervene when the administrative body has made an error of law. This occurs when the decision-maker misinterprets or misapplies the law or legal principles relevant to the case.

➧ Irrationality or Unreasonableness: Courts may interfere if the administrative decision is considered irrational or unreasonable. This refers to a decision that no reasonable decision-maker could have reached based on the evidence or circumstances.

➧ Unlawful Delegation or Exceeding Jurisdiction: Courts may intervene if the administrative body has unlawfully delegated its decision-making power to another body or if it has exceeded its jurisdiction or authority granted by law.

➧ Proportionality: In some jurisdictions, courts may interfere if the administrative decision is disproportionate to the objectives it seeks to achieve. This ground is particularly relevant in cases involving the infringement of fundamental rights or when the decision imposes severe penalties or restrictions.

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QUESTION 4(c)

Q Describe the procedure of registering a primary society
A

Solution


➧ Determine Eligibility: Ensure that your organization meets the eligibility criteria for registration as a primary society. These criteria may include having a minimum number of members, a specific purpose or objective, and compliance with any other requirements specified by the relevant laws or regulations.

➧ Name Reservation: Choose a unique name for your primary society. In some jurisdictions, you may need to reserve the name with the appropriate government department to ensure that it is not already in use by another organization.

➧ Prepare the Required Documentation: Gather the necessary documents and information required for registration. This may include:

➧ Completed application form: Fill out the application form provided by the registration authority, providing accurate and complete information about the primary society.

➧ Constitution or bylaws: Prepare a written constitution or bylaws that outline the purpose, objectives, and governing structure of the primary society.

➧ List of members: Prepare a list of the initial members of the primary society, including their names, addresses, and other relevant details as required.

➧ Registered office address: Provide the address of the primary society's registered office, which may be a physical location where official documents and correspondence will be sent.

➧ Submit the Application: Submit the completed application form and supporting documents to the appropriate registration authority. Pay any required fees, if applicable.

➧ Review and Approval: The registration authority will review the application and supporting documents to ensure compliance with the applicable laws and regulations. They may conduct background checks or request additional information if necessary.

➧ Certificate of Registration: If the application is approved, the registration authority will issue a Certificate of Registration or similar document confirming the establishment and legal recognition of the primary society. This certificate serves as proof of registration and may be required for various purposes, such as opening bank accounts or obtaining tax exemptions.

➧ Post-registration Requirements: After registration, there may be additional requirements, such as filing annual reports or maintaining accurate records of the primary society's activities and finances. Compliance with these ongoing obligations is crucial to maintain the registered status of the primary society.

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QUESTION 5(a)

Q (i) List functions of international treaties.
(ii) Outline sources of international law.
A

Solution


(i) Functions of international treaties:

➧ Establishing Rights and Obligations: International treaties serve as legally binding agreements between two or more states, establishing the rights and obligations of the parties involved. Treaties can create new rights, define existing rights, and outline the responsibilities of states in various areas of international relations.

➧ Regulating State Conduct: Treaties provide a framework for regulating state behavior and promoting cooperation among nations. They set out rules and norms that govern interactions between states, covering areas such as human rights, trade, environment, disarmament, and diplomatic relations.

➧ Resolving Disputes: Treaties often include dispute resolution mechanisms that allow states to resolve conflicts and disagreements peacefully. These mechanisms may involve negotiation, mediation, arbitration, or the establishment of international courts or tribunals to adjudicate disputes between states.

➧ Promoting Cooperation and Collaboration: Treaties foster cooperation among states by encouraging joint efforts to address common challenges and achieve shared goals. They provide a platform for states to collaborate on issues of mutual concern, such as economic development, security, climate change, and public health.

➧ Creating Legal Frameworks: Treaties establish legal frameworks that guide the implementation and enforcement of international norms and standards. They provide a basis for national legislation and policies, enabling states to align their domestic laws with international obligations.

(ii) Sources of international law:

➧ Treaties: Treaties, also known as international conventions, agreements, or protocols, are one of the primary sources of international law. Treaties are formal written agreements concluded between states or international organizations and are binding on the parties that have ratified or acceded to them.

➧ Customary International Law: Customary international law arises from the consistent and general practice of states, followed out of a sense of legal obligation. Customary law requires both a consistent practice and the belief that the practice is legally required (opinio juris). Customary international law is binding on all states, regardless of whether they have explicitly consented to it.

➧ General Principles of Law: General principles of law recognized by civilized nations form another source of international law. These principles include legal concepts that are recognized and applied by legal systems worldwide, such as principles of equity, good faith, estoppel, and justice.

➧ Judicial Decisions and Legal Scholarly Writings: Judicial decisions by international courts and tribunals, as well as writings of legal scholars and experts, contribute to the formation of international law. While not binding sources in themselves, they often serve as persuasive authorities and contribute to the development and interpretation of international law.

➧ Subsidiary Sources: Subsidiary sources of international law, including diplomatic correspondence, resolutions of international organizations, and decisions of national courts, can also contribute to the formation and interpretation of international law. While not primary sources, they may provide additional guidance and evidence of state practice.



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QUESTION 5(b)

Q (i) Distinguish between "mediation" and "arbitration"
(ii) Analyse four disadvantages of mediation over civil litigation.
A

Solution


(i) Distinguishing between "mediation" and "arbitration":

Mediation:

➢ Mediation is a voluntary and non-binding process in which a neutral third party, the mediator, facilitates communication and negotiation between disputing parties.
➢ The mediator assists the parties in identifying issues, exploring interests, and generating potential solutions to reach a mutually acceptable agreement.
➢ The mediator does not impose a decision or make rulings but instead helps the parties in finding a resolution through open dialogue and understanding.
➢ The outcome of mediation is a mutually agreed-upon settlement, which is usually non-binding unless the parties choose to make it legally enforceable.

Arbitration:

➢ Arbitration is a more formal process in which a neutral third party, the arbitrator, is appointed to make a binding decision on the dispute.
➢ The arbitrator acts as a judge-like figure and hears arguments, reviews evidence, and applies the relevant laws or contractual provisions to reach a final decision.
➢ The decision of the arbitrator, known as an arbitral award, is legally binding and enforceable, similar to a court judgment.
➢ Arbitration may be conducted with or without the involvement of the courts, depending on the jurisdiction and the parties' agreement.

Key differences:

➧ Decision-Making Authority: In mediation, the parties retain control over the outcome and make the final decision. The mediator's role is to facilitate the negotiation process. In arbitration, the arbitrator has the authority to make a binding decision, similar to a judge in court proceedings.

➧ Binding Nature: Mediation results in a non-binding settlement unless the parties choose to make it legally enforceable. Arbitration, on the other hand, leads to a binding decision that is enforceable in court.

➧ Formality: Mediation is generally less formal and structured than arbitration. Mediation allows for flexible discussions, creative problem-solving, and informal procedures. Arbitration follows a more formalized process, resembling a mini-trial, with procedures, evidence, and legal arguments.

➧ Control and Participation: In mediation, the parties have more control over the process and actively participate in the negotiations. In arbitration, the parties present their cases, but the decision-making authority lies with the arbitrator, limiting direct participation.

(ii) Disadvantages of mediation over civil litigation:

➧ Non-binding Settlement: One of the primary disadvantages of mediation is that any settlement reached is non-binding, unless the parties choose to make it legally enforceable. This means that there is no guarantee that the agreed-upon terms will be upheld or followed by the parties in the future.

➧ Lack of Formal Legal Recourse: Unlike civil litigation, mediation does not involve formal legal procedures or the opportunity to present evidence in a court of law. This may be disadvantageous if one party believes that they have a strong legal case and wishes to rely on legal principles, rules, or precedent.

➧ Power Imbalance: Mediation relies heavily on the willingness of both parties to engage in open and honest dialogue. However, if there is a significant power imbalance between the parties or one party dominates the process, the disadvantaged party may feel pressured to agree to terms that are not truly in their best interest.

➧ Limited Discovery and Information Exchange: In mediation, there is usually limited opportunity for extensive discovery or information exchange compared to civil litigation. This may be a disadvantage if the parties require a more thorough examination of facts, documents, or witnesses to support their case.

➧ Lack of Finality: As mediation focuses on reaching a settlement through negotiation, there is a potential for ongoing disputes or future disagreements to arise even after a settlement is reached. This lack of finality may lead to the need for further negotiations or potential re-engagement in the dispute resolution process.



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QUESTION 6(a)

Q Milka Pendo and Joseph Karani are partners carrying on business in the name and style of Moja Enterprises. Joseph Karani has nevertheless set up a similar competing business while retaining his partnership in Moja Enterprises. Milka Pendo feels aggrieved and intends to expel Joseph Karani from Moja Enterprises.

Analyse the legal principles applicable in the above case and advise Milka Pendo
A

Solution


➦ In the given scenario, Milka Pendo intends to expel Joseph Karani from Moja Enterprises because he has set up a similar competing business while still being a partner in Moja Enterprises.

To analyze the legal principles applicable in this case and provide advice to Milka Pendo, we need to consider the general principles of partnership law.

➧ Duty of Loyalty: Partners owe a fiduciary duty to act in the best interest of the partnership. This duty includes avoiding conflicts of interest and refraining from competing with the partnership without proper consent. Joseph Karani's establishment of a similar competing business while still being a partner may breach this duty.

➧ Partnership Agreement: The rights and obligations of partners are typically governed by a partnership agreement. It is essential to review the partnership deed to determine the specific provisions related to competition and the consequences of breaching those provisions. The partnership agreement may outline restrictions on partners engaging in similar businesses or competing directly with the partnership.

➧ Expulsion of a Partner: Partnership law generally allows for the expulsion of a partner under certain circumstances. Expulsion typically requires a valid reason, as specified in the partnership agreement or under statutory provisions. Breach of the duty of loyalty, such as engaging in a competing business, may be considered a valid ground for expulsion.

Based on these legal principles, Milka Pendo may consider the following advice:

➢ Review the Partnership Agreement: Carefully examine the partnership deed to identify any provisions regarding competition and expulsion. Determine if Joseph Karani's actions breach any specific terms outlined in the agreement.

➢ Mediation and Negotiation: Before taking any drastic actions, it may be beneficial to engage in mediation or negotiation with Joseph Karani. Attempt to resolve the issue through open communication and finding a mutually agreeable solution that protects the interests of both partners and the partnership itself.

➢ Explore Legal Remedies: If mediation and negotiation fail, and the breach of duty is substantial, Milka Pendo may consider pursuing legal remedies. This could involve seeking an injunction to restrain Joseph Karani from competing, initiating legal proceedings for breach of partnership agreement, or pursuing the expulsion of Joseph Karani from Moja Enterprises in accordance with the partnership agreement or applicable laws.

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QUESTION 6(b)

Q Hannah Asahani has received a document in her office which she is unable to identify. The document is dated I October 2017, written in Nairobi and addressed to Hannah Asahani by Peris Tunda in the following words: "Ten days after sight, pay to my order for value received"

Required:

(i) State the name of the above document.
(ii) Identify the three parties, in legal terms to the above document.
(iii) Highlight six essentials of the above document.
A

Solution


(i) State the name of the above document.

The above document is Bill of Exchange

Bill of Exchange is a financial document that serves as an order for payment.

(ii) The three parties involved in a Bill of exchange include

  1. The drawer,
  2. The drawee, and
  3. The payee.

➢ The drawer is the person who initiates the Bill of Exchange by creating and issuing the order.
➢ The drawee is the person or entity who is directed to make the payment stated in the Bill of Exchange.
➢ The payee is the person or entity who will ultimately receive the payment.


(iii) Essentials of the Bill of Exchange document include:

➧ Written Form: A Bill of Exchange must be in written form to ensure clarity and enforceability. It should be documented on paper or in an electronic format.

➧ Imperative Order: The document must contain an imperative order, clearly instructing the drawee to pay a specific sum of money. The language used should leave no room for ambiguity.

➧ Addressed Order: A Bill of Exchange must be an addressed order from one person (the drawer) to another (the drawee), specifying the intended recipient of the payment. This ensures that the payment obligation is clearly directed towards the designated party, adding clarity and certainty to the transaction.

➧ Drawer's Signature: The Bill of Exchange must be signed by the drawer, indicating their commitment to the payment obligation. The signature may be handwritten or in a digital format, depending on legal requirements.

➧ Specified Amount: The document should clearly state the amount of money to be paid. It should be an exact and determinable sum, expressed in the appropriate currency.

➧ Payable to Bearer or Order: The Bill of Exchange may be payable to either the bearer (whoever holds the document) or to a specific named party (order). The chosen payee format should be clearly indicated in the document.

➧ Fixed or Determinable Time for Payment: The Bill of Exchange should specify a fixed date or a determinable period after which the payment is due. This ensures clarity and avoids disputes regarding the payment deadline.

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QUESTION 7(a)

Q Describe the jurisdiction of the Employment and Labour Relations Court (formerly the Industrial Court) in your country.
A

Solution


The Employment and Labour Relations Court (formerly known as the Industrial Court) in Kenya has jurisdiction over the following areas:

  1. Disputes between Employers and Employees:
    • It hears and determines disputes arising out of employment relationships between employers and employees.
    • This includes disputes related to employment contracts, wrongful termination, unfair labour practices, discrimination, and breaches of employment obligations.
  2. Disputes between Employers and Trade Unions:
    • The court adjudicates disputes between employers and trade unions regarding matters such as collective bargaining agreements, recognition, and negotiation processes.
    • It ensures the fair treatment of both employers and trade unions and facilitates the resolution of conflicts in the collective bargaining context.
  3. Disputes between Employer Organizations or Federations and Trade Union Organizations:
    • The court resolves disputes between employer organizations or federations and trade union organizations.
    • This includes conflicts related to representation, membership, rights and obligations, and disputes arising from the interaction between employer and trade union umbrella bodies.
  4. Disputes between Employer Organizations or Federations and Their Members:
    • It handles disputes between employer organizations or federations and their members, who may have disagreements regarding internal organizational matters, representation, or adherence to organizational rules and bylaws.
  5. Disputes relating to the Registration and Enforcement of Collective Agreements:
    • The court has jurisdiction over disputes concerning the registration, interpretation, and enforcement of collective agreements between employers and trade unions.
    • It ensures that collective agreements are duly registered, followed, and enforced in line with applicable laws and regulations.
  6. Disputes concerning the Registration and Election of Trade Union Officials:
    • The court exercises jurisdiction over disputes related to the registration, election, and removal of trade union officials.
    • It ensures compliance with legal requirements, transparency, and fairness in the election processes, protecting the democratic rights of trade union members.


NOTE:

The Employment and Labour Relations Court plays a vital role in safeguarding the rights and interests of employers, employees, and trade unions, as well as ensuring compliance with labour laws and promoting harmonious labour relations in Kenya.


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QUESTION 7(b)

Q With reference to the law of persons, distinguish a "corporation" from an "unincorporated association'
A

Solution


Corporation: Unincorporated Association:
A corporation is a legal entity that is created and recognized as a separate person in the eyes of the law. An unincorporated association is a group of individuals or entities that come together for a common purpose or objective.
It is formed by complying with statutory requirements, such as filing the necessary documents and obtaining the appropriate legal approvals. It lacks separate legal personality and does not have the same legal status as a corporation.
A corporation has limited liability, meaning the personal assets of its shareholders or members are generally protected from the corporation's debts and liabilities. Members of an unincorporated association can collectively pursue their common goals, but the association itself does not exist as a separate legal entity.
It can enter into contracts, own property, sue or be sued, and engage in business activities in its own name. Since it is not recognized as a distinct legal person, an unincorporated association cannot enter into contracts, own property, or sue or be sued in its own name.
Shareholders or members of a corporation typically enjoy limited liability, and their rights and obligations are governed by the company's constitution and applicable laws. Members of an unincorporated association generally have unlimited personal liability for the debts and obligations of the association.
Examples of corporations include public companies, private companies, and non-profit organizations incorporated under specific laws. An unincorporated association is typically governed by its internal rules and regulations, often in the form of a constitution or bylaws.

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QUESTION 7(c)

Q Highlight six reasons why the law is important in commercial transactions.
A

Solution


➧ Legal Certainty: The law provides a framework of rules and regulations that bring certainty and predictability to commercial transactions. It establishes clear guidelines and standards that parties can rely upon when entering into contracts, conducting business, and resolving disputes.

➧ Enforceability: The law provides mechanisms for enforcing contracts and holding parties accountable for their obligations. It allows parties to seek legal remedies, such as damages or specific performance, in case of breach or non-compliance.

➧ Protection of Rights and Interests: Commercial law safeguards the rights and interests of parties involved in transactions. It establishes rules for fair competition, protects intellectual property, regulates consumer rights, and ensures that parties are treated fairly and equitably.

➧ Contractual Freedom: The law supports and upholds the principle of freedom of contract. It allows parties to negotiate and enter into agreements based on their mutual consent, subject to certain legal limitations. This freedom enables businesses to tailor their contractual relationships to their specific needs and objectives.

➧ Risk Management: Commercial law provides a legal framework for assessing and managing risks associated with transactions. It establishes rules for allocating risks between parties, such as through indemnification clauses, limitation of liability provisions, and insurance requirements. This promotes stability and confidence in business dealings.

➧ Dispute Resolution: The law offers mechanisms for resolving disputes that may arise during commercial transactions. It provides access to courts, arbitration, and alternative dispute resolution methods, enabling parties to seek timely and effective resolution of conflicts. This helps in preserving business relationships, reducing costs, and maintaining the overall integrity of the commercial environment.

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