BUSINESS LAW

INTRODUCTION TO LAW

There are various definitions of law but none has been generally accepted to be the most accurate
or complete definition of law.

The following are some of the definitions:

1. The law may be defined –as the body of principles recognized and applied by the state in the
administration of justice. (Salmond)

2. A law is a rule of conduct imposed and enforced by the sovereign. (Austin).meaning, a rule
enforced by a court of law in a given territory.

3. Whatever law may not be….it may be roughly defined as a body of rules for the guidance of
human conduct which are imposed upon and enforced among the members of a given state.
(Philip S. James)

4. Law consists of a body of rules which are seen to operate as binding rules into that community
by means of which sufficient compliance with the rules may be secured to enable the set of rules to
be seen binding.

5. A collection of rules of a human conduct prescribed by human beings for the obedience of
human beings

Purposes of Law

The main purpose of law is for the maintenance of peace and order. It is also a device for social
control i.e. a device for getting people to do things they would be unlikely to do if left to personal
inclination alone. Other functions of law include;

 It protects rights and enforces duties by providing remedies whenever this rights or duties
are not honored.
 Facilitating and effectuating private choice. It enables persons to make choices and gives
them legal effect. This is best illustrated by the law of contracts, marriage and succession.
 It resolves social conflicts. The rule of law facilitates the resolution of conflicts and provides
necessary resolution mechanisms.
 It controls and structures public powers; Rules of law govern various organs of government
and confer upon the powers exercisable by them. This promotes good governance,
accountability and transparency. It facilitates justice in the society.

Classification of Law

In any given state law may be classified as follows:

1. Public law: it is the branch of law which regulates the relations between citizens and the state. It
also regulates the operations of various organs of the state. This includes constitutional law,
administrative law and criminal law.

2. Private law: it is a branch of law that is concerned with the right and duties of one person to
another person. It covers the law of contract, tort, succession, agency, insurance and property.

3. Public international law: this consists of that body of law which regulates the relations between
states. It is on based on custom, treaties and conventions.

4. Private international law (conflict of laws) this branch of the law is mainly concerned with the
determination of what system of law is applicable in a case where foreign element are involved. For
example X orders a motor vehicle from Japan before the vehicle is delivered to him. Where does
he file suit for the refund of his money if the vehicle is not delivered?

5. Criminal law: this is a branch of the law which defines the things every person must do or must
not do and defines the type of punishment applicable for non-compliance. The bulk of criminal
law in Kenya is contained in the penal code.

6. Civil law: this is the branch of the law which regulates relations between private individuals by
enforcing obligations or compensating injury parties. It is defined by customary law, common law
and some Acts of parliament. This are of law is covered in contracts, succession, employment and
sales of goods.

7. Substantive law: this is a body of legal rules which defines or specifies what is lawful and or
unlawful to do. For example under Kenyan law marriage is between man and woman above the
age of 18 years and should not be between people who have the same sex or related in blood.

8. Procedural law: this is a body of rules which define of specify the steps to be taken or the
procedure to be followed, by a person who intends to do an act. The bulk of these rules are found
in the civil procedure and criminal procedure codes.

Law and Morality

Morality is the sense of judgment between right and wrong by reference to certain standards
developed by society over time. It defines standards of behavior widely accepted by a society and is
binding on the conscience of members of that society. An action that is considered to be opposed
to morality will generally be frowned upon by that society. However, morality is not enforceable by
courts of law.

This is compared to rules of law, which are binding, enforceable and have sanctions in all cases.
Wrongs in society are contraventions of law or morality or both. However the law incorporates a
significant proportion of morality. In such instances, where law and morality overlap, morality is
enforced as a rule of law. Such morality becomes part of the law. E.g. Killing a person is a crime as
well as immoral.

Relation of Law to Morality

  The existence of laws that serve to defend basic values such as laws against murder, rape,
malicious defamation of character etc proves that the two can work together.
 The existence of unjust laws proves that morality and law are not identical and do not
coincide.
 Laws govern conduct at least partly through fear of punishment. Whereas morality is
internalized and becomes habit-like or second nature and therefore governs conduct
without compulsion. The virtuous person does the appropriate thing because it is the
noble thing to do and not because it will result in punishment.
 As such, when people think that something is immoral they will work to have a law that
will forbid it and punish those that do it. However, if there is a law that says that doing B is
wrong and illegal and enough people no longer agree with that then those people will work
to change that law.

SOURCES OF KENYA LAW

This means the origin of the legal rules which constitute the law of Kenya. These sources are set
out in the judicature act 1967 section 3 (1) as follows:

1. The Constitution of Kenya.

A constitution is a formal document with comprehensive frame- work of rules and principles
through which a state operates. The rules in the constitution define the composition and powers
of different organs/branches of the state and their relationship to each other and to private
citizens.

The constitution of Kenya establishes the major organs of the government of Kenya as well as their
powers. It is divided into eleven chapters, which deal with various matters. There are three major
organs of the government viz:

a) The legislature: Chapter 8 (Article 93) of the Constitution establishes the legislature i.e.
parliament as a bicameral house that is the National assembly and the senate.

b) The executive: Chapter 9 of the Constitution deals with the executive and more specifically
Article 130 describes the executive to include the president, the deputy president and the Cabinet.

c) The judiciary: Chapter 10 of the Constitution deals with the Judiciary i.e. the officers who are
vested with judicial authority under Article 159.

The constitution also provides for the protection of fundamental rights and freedoms under
Chapter 4 on the Bill of Rights. Such fundamental rights include the right to life, freedom of
expression among many others.

It is to be noted that the constitution is supreme and takes precedence over all other forms of law;
written or unwritten. Therefore any other law must comply with these minimum requirements of
the constitution otherwise it shall be void.

2. Statutory laws/legislation.
These are laws made or passed by parliament in the form of acts. Before the law becomes an Act it
starts as a Bill. A Bill is a proposed law. There are two types of bills:

i. Public bills: are those affecting the general public and are introduced by a minister.
ii. Private bills: are those which cover the interests of a specific section of the community.
They are also introduced by a minister but it is also possible for a private member of
parliament (MP) to introduce a bill on a matter of importance to him which is not
taken up by the government.

Stages of a Bill

a) First reading: this is a stage where the formal introduction of the bill is done to parliament by
the minister or a private member. A suitable date for debate is fixed and once the bill is approved,
it is printed and copies given to the MPs for preparation.

b) Second reading: at this stage the mover of the bill explains its purpose and the main policy
issues involved. Every member is allowed to participate in the debate but can speak only once. At
the end of the debate a vote on the bill takes place and if the majority votes for it, the bill passes to
the next stage.

c) The committee stage: a committee of the entire house or a small committee considers the
details of the bill thoroughly clause by clause.

d) The reporting stage: here the chairman of the committee presents the bill back to the House
where the house can be given the opportunity to debate the amendments proposed by the
committee

e) Third reading: at this stage, the details of the bill are not debated and only minor drafting
changes are permitted. The house passes the bill after that.

f) President’s assent: the bill becomes law when the president signs it. But the president can
refuse to sign it if he has reservations. In this case he has a duty to send it back to parliament
giving reasons for his reservations.

Once assent is given the bill is then entered in the statute book and becomes part of the statute law
of the land , but it only becomes operational on the day published in the gazette or specified ,
which is known as the date of commencement.

3. Subsidiary /delegated legislation

Due to the volume of work it becomes necessary for parliament to delegate its powers of legislation
to subordinate competent bodies such as state organs, state officers or persons in authority (under
article 94(5) and (6) of the constitution. For example parliament has established KNEC (Kenya
National Examination Council) and has delegated to it the power to come up with regulations
regarding the conduct of exam regulations.

4. The English common law.

Common law consists of the ancient customs and usages of England, which have been recognized
and given the force of the law. This law does not include legislation. It was developed by judges on
the principle of stare decisis which means that it is not the result of legislation i.e. the law created
by custom of the people and decisions of the judges.

5. The doctrines of equity.

Equity is a set of rules formulated and administered by the court of chancery before 1873 to
supplement the rules of common law. This court dealt only those cases where common law either
provided no remedy or provided a remedy which was not adequate. Equity therefore is a body of
principles constituting what is fair and right. Rules of Equity are knows as maxims and include: He
who comes to equity must come with clean hands i.e. the plaintiffs must have acted fairly and
honestly.

6. Statutes of General Application in Force in England on 12th August, 1897

The phrase refers to those statutes that applied to the inhabitants of England generally. These laws
are applicable only if:

a) They do not conflict with either constitution or any other written laws applicable constitution
or any other written laws applicable in Kenya.

b) And must have been passed before 12th august, 1897.

c) The circumstances of Kenya and its inhabitants permit.

7. African Customary Law.

African customary law may be described as the law based on the customs of the ethnic groups
which constitute Kenya‘s indigenous or Africa population. The application of African Customary
Law is however limited as follows:

 The law is only applicable in civil cases

 One of the parties must be subject to it or affected by it.
 Customary law will only be applied if it is not to repugnant to justice and morality
 The customary law will be applied only if it is not inconsistent with any written law.

8. Islamic Law.

This law is applicable in Kenya under article 170(5) of the Constitution and section 5 of the
Kadhis‘ court act 1967 when it is necessary to determine questions of Muslim law relating to
Personal status, Divorce, Marriage or Inheritance in which all the parties profess the Muslim
religion and submit to the jurisdiction of the Kadhi‘s courts.

9. Hindu customs.
The Hindu Marriage and Divorce Act 1960, S.5 (1) provides that a marriage between Hindus may
be solemnized in accordance with the customary rites and ceremonies of either party thereto. This
provision constitutes Hindu custom as a source of Kenya law for the specified purposes.

10. Case law and judicial precedent

In deciding cases or disputes, judges of lower courts follow the decision of higher courts if cases
involving similar facts and points of law come before them. The principle of stare decisis (Latin
meaning to stand on decided cases) or judicial precedent is a legal rule that requires a judge
hearing a case to refer to earlier cases decided by his predecessors in order to find out if the
material facts of any of those cases before him are similar and, in the event of such finding, to
decide the case before him in the same way as the earlier case had been decided.

THE KENYAN COURT SYSTEM

Structure and jurisdiction of Courts in Kenya

The Courts in Kenya operate in two levels: Superior Courts and Subordinate Courts. The
important aspects in the Structure of Courts are:

i. The structure – The hierarchy or levels of Courts.

ii. Establishment – The composition or who presides in that Court.
iii. Jurisdiction – The powers of different Courts to hear and determine
disputes. Jurisdictions are either Geographical / territorial limits of their powers or
Functional powers (to hear Original matters, Appellate matters or both matters or subject
matter (whether it is civil or criminal justice) or Pecuniary (the range of monetary or
financial value of subject matter).

The supreme Court

The Court of Appeal

The High Court (includes the ELC & ELRC)

The Kadhi Courts Court Martial and Tribunals

 The Magistrate Courts

Superior Courts

The Supreme Court

The Supreme Court of Kenya is established under Article 163 of the Constitution of Kenya. It
comprises of 7 (Seven) Judges: the Chief Justice, who is the president of the Court, the Deputy
Chief Justice, who is the deputy to the Chief Justice and the vice-president of the court and five
other judges.

The Supreme Court is properly constituted for purposes of its proceedings when it has a
composition of five judges and has exclusive original jurisdiction to hear and determine disputes
relating to the elections to the office of President arising under Article 140 and subject to clause
(4) and (5) of Article 163 of the Constitution, appellate jurisdiction to hear and determine appeals
from the Court of Appeal and any other court or tribunal as prescribed by national legislation.

Appeals from the Court of Appeal to the Supreme Court are as a matter of right in any case
involving the interpretation or application of this Constitution and in any other case in which the
Supreme Court, or the Court of Appeal, certifies that a matter of general public importance is
involved, subject to clause (5).
The Supreme Court may review a certification by the Court of Appeal and either affirms, vary or
overturn it.

The Supreme Court may give an advisory opinion at the request of the national government, any
State organ, or any county government with respect to any matter concerning county government.

All courts, other than the Supreme Court, are bound by the decisions of the Supreme Court.

The Court Of Appeal

Establishment: The Court of Appeal is established under Article164 of the Constitution of Kenya
2010.

Composition: The Court of Appeal consists of a number of judges, being not fewer than 12
(twelve), as may be prescribed by an Act of Parliament and the Court is to be organized and
administered in the manner prescribed by an Act of Parliament. The Court comprises of a
President of the Court of Appeal who is elected by the judges of the Court of Appeal from among
themselves. The Court of Appeal Judges retire at the age of 74 years.

Jurisdiction: The Court of Appeal is a superior court of record therefore it sets precedents. It has
limited original jurisdiction. It was created to hear appeals from the High court.
The only moment the Court Appeal can have original jurisdiction is in punishment for contempt
of court, and when stating execution of orders of the High Court. Procedure: The practice and
procedure of the court of appeal are regulated by the rules of court made by the Rules Committee
constituted under the Appellate Jurisdiction Act (Cap. 9). The Act provides that an uneven
number of at least three judges shall sit for the determination of any matter by the court. The
decision of the court shall be according to the opinion of a majority of the judges who sat for the
purposes of determining that matter.

The court has powers to:

i. Determine a case finally.

ii. Order for a trial.
iii. Order for a re-trial.
iv. Frame issues for the determination of the High Court.
v. Receive additional evidence or order that it be taken by another court.

The High Court

Establishment: The High Court is established under Article 165 and it consists of a number of
judges to be prescribed by an Act of Parliament. The Court is organized and administered in the
manner prescribed by an Act of Parliament. The Court has a Principal Judge, who is elected by the
judges of the High Court from among themselves.

Composition: Ordinarily, the High Court is duly constituted by one Judge sitting alone. However
there are instances where two or more High Court Judges may be required to determine certain
kinds of cases.

Jurisdiction:

i. The High Court has unlimited original jurisdiction in criminal and civil matters.
ii. The High Court has jurisdiction to determine the question whether a right or fundamental
freedom in the Bill of Rights has been denied, violated, infringed or threatened.
iii. The High Court has jurisdiction to hear an appeal from a decision of a tribunal appointed
under the Constitution or national legislation to consider the removal of a person from
office, other than a tribunal appointed under Article 144.
iv. The High Court has jurisdiction to hear any question respecting the interpretation of this
Constitution including the determination of: the question whether any law is inconsistent
with or in contravention of the Constitution, the question whether anything said to be
done under the authority of the Constitution or of any law is inconsistent with, or in
contravention of the Constitution, any matter relating to constitutional powers of State
organs in respect of county governments and any matter relating to the constitutional
relationship between the levels of government, and a question relating to conflict of laws
under Article 191;any other jurisdiction, original or appellate, conferred on it by
legislation.
v. The High Court does not have jurisdiction in respect of matters reserved for the exclusive
jurisdiction of the Supreme Court under this Constitution or falling within the
jurisdiction of the courts contemplated in Article 162 (2).
 vi. The High Court has supervisory jurisdiction over the subordinate courts and over any
person, body or authority exercising a judicial or quasi-judicial function, but not over a
superior court. Also being a Superior court of record means that the decisions of the High
Court as precedents, are binding on the subordinate courts by the doctrine of stare decisis.
vii. Although High Court has unlimited original jurisdiction in civil and criminal cases in
actual practice, it will hear those criminal cases which cannot be tried by the subordinate
courts i.e. murder and treason. The High Court has power to pass any sentence authorized
by law.
viii. In addition to the ordinary civil and criminal jurisdiction or the High Court, there are
other matters, which can only be heard by the High Court. Thus, the High Court enjoys
special powers and jurisdiction in the following matters as conferred to it by the
constitution and other legislations some of which are given hereinafter:-

High Court Special Powers

1. Supervisory Jurisdiction

The Constitution confers specific, powers on the High Court to exercise supervisory jurisdiction in
any civil and criminal proceedings before subordinate courts and may make such orders, issue such
writs and give such directions as may consider appropriate for the purpose of ensuring that justice
is duly administered by such courts. This includes the power of the High Court to transfer
proceedings from one court to the other.

To invoke the supervisory jurisdiction of the High Court a person must have exhausted all other
available remedies and right of appeal.

2. Interpretation of the Constitution

The Constitution provides that where any question as to the interpretation of the constitution
arises in any proceedings in any subordinate court, and the court is of the opinion that the
question involves a substantial question of law, the court may, and shall if any party to the
proceedings so requests, refer the question to the High Court. The High Court shall be composed
of an uneven number of judges, not being less than three when it determines the constitutional
question referred to it. The decision of the High Court is binding on the Court that referred the
question to the High Court and it must dispose of the case in accordance with the High Court‘s
decision.

3. Admiralty Jurisdiction

Section 4 of the Judicature Act Chapter 8 (1967) provides that the High Court will act as a court
of admiralty and will decide ―matters arising on the high seas or in territorial waters or upon any
lake or other navigable inland waters in Kenya‖.

4. Election Jurisdiction

Under the National Assembly and Presidential Election Act, the High court has special powers to
hear and determine disputes arising from the national electoral process. The High Court may
make an order as it deems fit, including the nullification of the election results upon hearing of a
petition presented to it by a voter or loser in the election.

5. Succession/Probate Jurisdiction

The Probate Division of the High court has jurisdiction to hear any application and determine any
dispute and pronounce such decree and issue such orders as may be expedient in inheritance
matters e.g. the High Court may issue probate i.e. a person has been validly appointed by a will to
administer the property of the deceased.

6. Matrimonial Cases

The court exercises jurisdiction in divorce matters.

7. Other powers

 To protect and enforce Fundamental rights and Freedoms of individuals which are set out
in Chapter Four of the Constitution also otherwise referred to as the Bill of Rights.

 To hear and determine Bankruptcy proceedings.

 To supervise winding up of dissolved companies.

The Constitution has also established the Industrial Court and the Land and Environment
Court at the same level as the High Court. Industrial court deals with labour and employment
matters while the Land and Environment Court deals with land and environment matters and
appeals from all tribunals dealing in land and environment matters.

Subordinate Courts

Article 169 (1) of the Constitution sets out the subordinates Courts which are:

a) the Magistrates courts;

b) the Kadhis‘ courts;
c) the Courts Martial; and
d) Any other court or local tribunal as may be established by an Act of Parliament.

Magistrates’ Courts

These are courts established under the Magistrates‘ Courts Act no. 26 of 2015. The said law
provides under section 5 that these courts are subordinate to the high court. This court is presided
over by a chief magistrate, a senior principle magistrate, principle magistrate, a senior resident
magistrate or a resident magistrate. Under S.7 (3) a magistrate's court shall have jurisdiction in
proceedings of a civil nature concerning any of the following matters under African customary law:

a) land held under customary tenure;

b) marriage, divorce, maintenance or dowry;
c) seduction or pregnancy of an unmarried woman or girl;
d) enticement of, or adultery with a married person;
 e) matters affecting status, and in particular the status of widows and children including
guardianship, custody, adoption and legitimacy; and
f) Intestate succession and administration of intestate estates, so far as they are not governed
by any written law.

A Magistrate‘s Court has the authority to hear all criminal cases except murder, treason and crimes
under international criminal law.

This Court also has jurisdiction over claims relating to violation of human rights only on rights
guaranteed under Article 25 (a) of the Constitution dealing with freedom from torture and cruel,
inhuman or degrading treatment or punishment; and Article 25 (b) of the Constitution dealing
with freedom from slavery or servitude.

It is important to note that the Magistrates‘ Courts Act did do away with the ranking of the
Residents Magistrates‘ Courts and the District Magistrates Courts and consolidated them as the
Magistrates‘ Courts under the Act.

Kadhis’ Courts.

These are courts established under article 170 of the constitution. Their civil jurisdiction relates to
determining questions of Muslim law relating to: Personal status, Marriage, Divorce or
inheritance, and the parties in the case profess the Muslim religion and submit to the jurisdiction
of the Kadhi‘s courts. These courts do not have criminal jurisdiction.

Courts Martial

These courts deal with matters relating to the disciplined forces. They are established under the
armed force act, S. 85(1). It is not a permanent court. It is set up as and when issues arise. It deals
with trying persons in the forces, who are alleged to have committed an offence. Once the trial is
over, the court is dissolved.

Tribunals

Tribunals are bodies established by Acts of Parliament to exercise judicial or quasi-judicial

functions. They supplement ordinary courts in the administration of justice. Tribunals, however,
do not have penal jurisdiction. Tribunals, like the courts, have to respect the Bill of Rights in their
decisions and not be repugnant to justice and morality or be inconsistent with the Constitution or
other laws of the land. Most tribunals are subject to the supervision of the High Court. Examples
include Rent Restriction Tribunal, Competition Tribunal among others.

LAW OF CONTRACTS

Definition

A contract is an agreement entered into by two or more parties with the intention of creating a
legal obligation. A contract in Kenya is classified as an obligatory agreement i.e. it creates
enforceable obligations. In Kenya contract law is primarily regulated by the 'common law'.
The function of contract law is to provide a legal framework within which persons can transact
business and exchange resources, secure in the knowledge that the law will uphold their
agreements and, if necessary, enforce them.

A contract has certain characteristic features:

 It is a juristic act. The law attaches the consequences intended by the parties. The parties
should be aware that they creating a legal obligation between them.
 It is necessarily bilateral or even multilateral; a contract cannot be unilateral.
 It entails promises or undertakings, on one or both sides, to make certain performances:
that is, to give something (dare), to do something (facere) or to refrain from doing
something (non facere). Alternatively, it may be a warranty that a certain state of affairs
exists.
 It usually entails reciprocity, in that one party's performance is promised in exchange for
the performance of the other party.

Formation of a contract

In order for a contract to be created, one of the parties must make an offer to the other party and
the other party must accept this offer Furthermore, the circumstances in which the offer and
acceptance were made must indicate that the parties intended to enter into a legal relationship. A
final requirement, which distinguishes contracts from gifts, is that the two contracting parties must
both give some benefit (known as consideration) to the other.

There are then four requirements of a contract. There must be an offer, an acceptance of that
offer, an intention to create legal relations and consideration given by both parties.

Once a contract has been made, both sides will be bound to honor its terms or take the legal
consequences. A party who does not stick to what was agreed in a contract is said to have breached
the contract. Whenever one of the parties breaches a contract, legal remedies will be available to
the other party.

Offer

A person who makes an offer is an offeror and a person to whom an offer is made is an offeree.
An offer is made when an offeror proposes a set of terms to an offeree, with the intention that if
the proposed terms are accepted they will create a binding contract between the two parties.

By accepting the terms proposed, the offeree would also agree to become legally bound by them.
This acceptance would therefore form a contract. As a contract is a legally binding agreement,
neither an offer nor an acceptance should be made without willingness to accept the legal
consequences.

An offer being a unilateral declaration does not in itself give rise to a binding obligation but for an
offer to be valid, it must be:

 Definite
 Complete
 Clear and certain; and
 Compliant with the requirements of the Consumer Protection Act

Invitation to treat

It is important to make a distinction between an offer and an invitation to treat. An invitation to

treat is not an offer; it is only an invitation to make an offer. An offer should not be made by a
person who is not fully prepared to take the legal consequences of its being accepted. E.g. I should
not offer to sell you my car for Kshs.600, 000 unless I am fully prepared to go through with the
deal. Because if you accept my offer, I will either have to go through with the contract which will
have been created or take the legal consequences.

But a response to an invitation to treat cannot result in a binding contract. It is quite safe for me
to ask you how much you would give me for my car. You might name a price (thereby making an
offer) but I would have no obligation to agree to the deal. Advertisements can amount either to
offers or to invitations to treat. If an advertisement is an offer then a person who accepts the offer
makes a contract with the person who advertised.

A court decides whether or not one of the parties has made an offer by looking at what it thinks
that both of the parties intended. All the circumstances will be considered in reaching this
decision.

One of the cases that the court had to decide whether or not an advertisement was merely an
invitation to treat or whether it was in fact an offer was the case of Carlill v The Carbolic Smoke
Co [1893] (Court of Appeal) in this case the defendants manufactured smoke balls. They claimed
that the use of these smoke balls cured many illnesses and made it impossible to catch the flu. A
large advertising campaign stated that if anyone used a smoke ball correctly, but still caught the flu,
they would be paid £ 100 reward. One advertisement stated that the defendants had deposited £
1,000 in a Regent Street bank to show that they meant what they said. The Claimant, Mrs.Carlill,
was persuaded by this advertisement to buy a smoke ball. Despite using the smoke ball properly,
she still caught flu. When Mrs Calill claimed the £ 100 reward the defendants refused to pay,
arguing that the advertisement was not an offer.

It was held that the advertisement was an offer of a unilateral contract. The claimant had accepted
this offer by using the smoke ball in the correct way and catching flu. She was therefore entitled to
the £ 100 reward.

In this case the offer was made to the whole world. Offers are more usually made to just one
person or to a limited number of people. Only a person to whom an offer was made, an offeree
can accept an offer.

Customers who buy goods in shops make contracts to buy those goods. A customer makes an offer
to buy the goods displayed by selecting the goods and taking them to the till. The cashier can
accept this offer by ringing up the price. However, the cashier has no obligation to accept the offer
and can refuse to sell. A display of goods in a shop window does not amount to an offer to sell the
goods displayed. The display is only an invitation to treat.

Types of Offers

Specific offer: Specific offer is made to one person or group of persons and can only be accepted
by the same, not anyone else

General offer: It is the offer made to the public at large and not to any particular person. It can be
accepted by anyone by abiding by the terms of it.

Counter offer: Offer made by the offeree.

Cross offer: When both the parties involved make a similar offer to one another without knowing
each other‘s offer.

Standing or open offer: This is an offer that is continuous in nature.

Express offer: It is an offer that is done through words that can either be oral or written. The oral
offer can be made face to face or via telephone. The written offer can be made via text,
advertisements or email.

Implied offer: It is an offer conveyed through acting or signs. But if a party observes a silence over
the offer then that offer cannot be valid.

Termination of Offers

As soon as an offer is accepted, a contract is created. However, an offer which has been made
might cease to exist in various ways, and once an offer has ceased to exist it can no longer be
accepted.

Revocation
If an offer is revoked, it is called off by the offeror. Once an offer has been revoked it can no
longer be accepted. A revocation is effective when it is received rather than when it is sent.

Refusal

If an offeree refuses an offer then, as far as that offeree is concerned, the offer is terminated and
cannot later be accepted. A counter offer is regarded as a refusal of the original offer and therefore
ends it.

A request for more information does not imply a rejection of the offer and therefore it does not
terminate it.

Lapse of time

If a time limit is put on an offer then the offer will end when the time limit expires. However, even
where there is a time limit the off eror can revoke the offer before the expiry time (unless some
consideration was given for keeping the offer open). When no time limit is placed upon an offer, it
will remain open for a reasonable time. The amount of time which is reasonable will depend upon
all the circumstances of the case

Death of parties

If the offeree knows that the offeror has died, the offer will lapse; if the offeree is unaware of the
offeror‘s death, it probably will not. However, where an offer requires personal performance by the
offeror (such as painting a picture, or appearing in a film) it will usually lapse on the offeror‘s
death.

Acceptance

A contract comes into existence as soon as an offer is validly accepted. An acceptance is an

expression of intent by the offeree, signifying his agreement to the offer. The acceptance of an
offer is regarded as complete only when it is received by the offeror. An acceptance must be made
with respect to all terms in the offer. The acceptance may be made either by conduct or directly
communicated to the offeror.

For an acceptance to be valid, it must be:

 unconditional;
 unequivocal;
 consciously accepted by the person to whom it was addressed; and
 Compliant with any formalities set by law or the offeror.

Consideration

The general rule is that a promise cannot be binding if it is not accompanied by consideration.
Consideration is "something of value" which is given for a promise and is required in order to
make the promise enforceable as a contract.

The Fundamental rules surrounding consideration as a contractual principle are illustrated below.
Consideration must be sufficient but need not be adequate.

The import of this principle implies that consideration need not be of economical equivalence
with the goods which are the subject matter of the contract. Courts are not generally concerned
with whether adequate value was given. This is because of the doctrine of freedom of contract and
in that case the courts are reluctant to encroach in the specific terms of the agreement.

Consideration must not be from the past.

Past consideration is not good consideration. if one gave out money to someone some time ago
they cannot purport to use this as consideration or payment in order to buy a certain commodity
from him.

The doctrine of privity of contract

The doctrine of privity of contract arose through the common law as a means of regulating the
relationships between parties to a contract. The doctrine establishes that only parties to a contract
may sue or be sued on it, and consequently provides rights and imposes obligations on those
parties alone. This is important as many situations involve contracts where a right or benefit is to
be provided for a third party. Even though the contract is for the benefit of this third party, he/she
is unable to enforce it as he/she is not privy to the contract. The two elements necessary to enforce
a contract are that:

 The claimant must be a party to it, and

 There must be consideration provided by the promisee.

These have become somewhat merged in the cases, although they remain legally separate.

 ‗Only a person who is a party to a contract can sue on it‘: only a promisee may enforce a
contract as others are not privy to it:

Dunlop Tyre Co. v Selfridge

Facts:
Dunlop Tyre Company had contracted with a wholesale distribution company called Dew & Co.
The contract provided that Dew would obtain an agreement from the retailers to whom it sold
tyres that they would not sell them below the list price established by Dunlop. Dew obtained the
agreements, and in a contract with Selfridge, it transpired that Selfridge sold tyres below this
contracted price. Dunlop sought to obtain an injunction against Selfridge from continuing to sell
the tyres at the price, and also initiated a damages action for breach of contract. The House of
Lords held that there was no agreement between Dunlop and Selfridge. The contracts were
between Dunlop and Dew, and Dew and Selfridge, therefore Selfridge was not party to the
contractual agreement between Dunlop and Dew, and Dunlop could not enforce the contract.
Selfridge was not the agent of Dunlop, and there was no consideration from Dunlop in return for
Selfridge‘s promise to sell at the list price.
  Consideration must move from the promisee: it is a necessary aspect of contract Law that
there must exist a bargaining element to establish an enforceable contract.

Tweddle v Atkinson

Facts:

Mr Tweddle was engaged to marry Miss Guy and the fathers of the couple agreed to pay a sum
of money when they got married. The contract stated that the husband should have the right
to bring an action if either party failed in their obligations to pay the money. Mr Guy,
however, died before the couple were married and hence before any money was paid.
Following the wedding, Mr Tweddle attempted to enforce the contract from Mr Guy‘s estate;
however he had not provided any consideration to Mr Guy for the promisee to pay him. Mr
Tweddle was merely a beneficiary to the contract and not a party to it.

The Exceptions to privity

Various exceptions to the general rule of privity have developed through the common law and
examples of these are identified as:

• Agency: An agent is someone who has the authority to conclude binding agreements on behalf
of someone else (known as the principal). This means that if an agent makes a contract with a
third party, and the third party is aware that the person is acting as an agent with the authority of
the principal, the principal can sue and be sued on the contract as if it were he/she who had
agreed the contract.

• Collateral contracts: A contract established between two parties may indirectly create another
contract with a third party. In Shanklin Pier v Detel Products Shanklin employed a firm of
contractors to paint its pier. Shanklin had negotiated with a paint manufacturer (Detel) about the
suitability of its paint, and having received such assurances that it would last for seven years,
included a term of the agreement with the contractors that they must purchase and use Detel‘s
paint for the purpose of the job. However, when the paint was used it only lasted for three months
before beginning to peel, therefore Shanklin brought an action for damages against Detel. Detel
claimed that privity of contract stopped Shanklin from suing them. However, the court held a
collateral contract had been established between the two parties following the contract between
Shanklin and the contractors. Further, consideration had been established for the promise
through Shanklin‘s insistence that the contractors use Detel‘s paint.

• Trusts: A person may transfer property to a second person (known as the trustee) who maintains
the property for the benefit of others (known as a beneficiary). The person who has created the
trust identifies the rules by which the trust is to be administered, and if these terms are not
complied with, the beneficiary may seek to enforce it.

• Insurance contracts: A third party may be able to claim under an insurance policy that has been
established for his/her benefit. This is despite the fact that he/she did not create the contract or
pay the premiums, and this can be most commonly seen in life insurance policies. Where the
benefit is provided for the insured person‘s family.
• Restrictive covenants: Restrictive covenants are used to protect land and bind purchasers as to
the provisions laid down which benefit adjoining owners and interested parties in the area.

Intention to Create Legal Relations

For the parties to be able to sue and be sued on a contract, they must intend it to create legal
relations. ‗Legal relations‘ means that the parties view the agreement as a legally enforceable
contract and a breach of the contract could result in a remedy being sought. The courts have
traditionally looked to the parties‘ intentions, which may be viewed in light of what a ‗reasonable
person‘ would have considered the intentions to be. In determining their intentions, the courts
will look to the parties‘ use of words and the context in which they use them.

Certainty of Terms

Terms of a contract must be drafted carefully and precisely if they are to be relied on by parties.
Parties must ensure that the terms contained within contracts are sufficiently precise and detailed
to enable parties, and indeed courts if necessary, to identify the true intentions and responsibilities
contained therein.

Once agreement, consideration, intention to create legal relations and certainty of terms has been
fulfilled, a contract may be established. Problems may however exist in how the agreement was
concluded that could affect its validity. Therefore the emphasis of this next part is to identify
where problems may occur that could prevent the successful operation of the contract, despite
fulfilling the essential features.

Capacity to enter a valid contract

For an enforceable agreement to be created the parties involved must have the capacity to create a
contract. This is particularly so when the person is vulnerable.

Minors

A minor is a person under 18 years of age (when he/she reaches majority) and has the capacity to
establish most contracts. However, whilst this is generally true, situations exist where the minor
requires protection and in those situations the contract established may be voidable, hence
allowing the minor the ability to avoid the contact.

Mental Incapacity

People who have been identified with a mental incapacity are protected from entering contracts.
The consequence is that any agreement made which purports to be a contact will be void. This is
the situation even if the other party was not aware of the ‗patient‘s‘ incapacity.

Intoxication

Persons who are dunk or under the influence where a contract is concluded are generally bound
by the contract as it is presumed by the courts that he/she is aware of his/her actions. If the other
party is unaware of the intoxication the contract is enforceable, but if the party is so intoxicated
that he/she does not know the consequences of the agreement he/she is concluding, and the other
party is aware, the contract is voidable.

Illegality

Illegality, in terms of contract law, refers to those contracts that he will not be permitted (they are
void) because they may be illegal in nature such as those contrary to statute, or they may be against
public policy.

Mistake
Mistake is the area of law where the contract may be held void if the mistake was fundamental to
the contract, as the parties did not have a true agreement. However, it is distinct from where the
parties may have erroneously entered into a contract that is a bad bargain, or where one party later
has ‗second thoughts‘.
In order for the mistake to enable the contract to be made void, it must be fundamental, and
‗operative‘, which prevents the consensus ad idem that is required for a contract to be established.
A mistake can be a common mistake (where both parties make the same mistake); mutual (where
the parties are at cross- purposes—also known as bilateral mistake); and unilateral (where only one
party is mistaken).

Common mistake: Here the parties have made the same mistake. Typical examples include
contracts involving property which neither party is aware no longer exists. The remedy for
common mistake is that the contract is void
(Where it involves a fundamental mistake).

Mutual mistake: It is a possibility that in the negotiations for a contract, both parties are at cross-
purposes as to the nature of the contract or its subject matter. Each party is genuinely mistaken
about different things. Here the court will decide whether the contract exists on the terms as seen
by one of the parties.

Unilateral mistake: The more common form of mistake is where one party is mistaken as to the
terms of the contract or the identity of the other party. This, by its nature, involves the mistake by
one party.

The remedy of rectification

Rectification is an equitable remedy available in the case of mistake where a written agreement
between the parties fails to reflect the actual agreement that was reached. The courts have an
option, if they believe that a contract did not reflect the true intentions of the parties at the time of
the agreement, to have the relevant terms changed. This is particularly relevant where one of the
parties has deliberately intended, through false and misleading information, to induce the
contract. In Hurst Stores and Interiors Ltd v ML Europe Property Ltd, ML Europe made substantial
changes to a draft contract with Hurst Stores before it was signed. Hurst was not informed, or
aware, of these terms and signed the final contract on the basis that it contained the same terms as
the previous draft. It was held by the Court of Appeal that ML Europe must have known Hurst
was unaware of the changes to the final contract and consequently ordered that the contract be
changed back to the previous draft.

Misrepresentation

Contract Law imposes a duty not to make any false statements of fact or law the other contracting
party which would induce them to enter into the contract. A misrepresentation will render a
contract voidable. That is, the innocent party can choose when to void the contract.

Elements of a misrepresentation

There must be a statement of existing fact or law. The general rule is that silence cannot constitute
a misrepresentation. The more specific the statement, the more likely it will constitute a
misrepresentation.

 The statement must have been untrue.

 The statement must have been of material fact.
 The innocent party believed the statement to be true.
 It must have been an inducement to enter the contract: For a statement to amount to a
misrepresentation it must have been of sufficient importance and materially relevant to
induce the other party to have entered into the agreement. This does not necessarily mean
that the statement was the only consideration in the innocent party‘s decision to enter the
agreement, but it must have been an important factor and the innocent party must have
relied on the statement.

Types of misrepresentation

Fraudulent misrepresentation: This involves a false statement that has been made knowingly
or recklessly. This entitles the innocent party to claim rescission of the contract and/or
damages, and sue in the tort of deceit.

Negligent misrepresentation: This involves a false statement being made which induces the
other party to enter a contract. However, it does not involve fraud, and so is easier to prove, as
the party making the statement is unable to show that he/she believed the statement to be
true, or held a reasonable belief that it was true. This entitles the innocent party to claim
rescission and damages.

Innocent misrepresentation: This involves a false statement, but in the honest, albeit mistaken
belief that it was true. This entitles the innocent party to claim rescission as the contract is
voidable, and if this is not possible, it may provide for a damages claim. To demonstrate
innocent misrepresentation the party needs to establish that he/she believed the statement that
was made, and he/she had reasonable grounds upon which to hold this belief.

Remedies for Misrepresentation

The remedies available for misrepresentation depend upon the type of misrepresentation
involved (fraudulent, negligent, or innocent).
 • Rescission: The remedy of rescission is an equitable remedy where the party has the option
to set the contract aside and the parties are returned to their pre- contractual position. In order
for the parties to be placed back in their original position the court may order any money paid,
or any property which has been transferred, to be returned to the relevant parties.

Damages: A simpler method of remedying the loss sustained due to a misrepresentation is

through an award of damages. Here an amount of money is awarded to the innocent party to
compensate him/her for any losses sustained. In the case of fraudulent misrepresentation, the
damages are intended to place the party in the position he/she would have been if the fraud
had not been committed

Freedom of contract relies on the presumption that those who enter into contracts do so under
their own free will. If a contract is established on the basis of violence (or a threat), or unlawful
economic pressure, this may be considered a case of duress, whereas if a party has unfairly
exploited its relationship with the other party this may amount to undue influence. In each of
these situations the contract will be held to be voidable; duress on the basis of the common law,
and undue influence in equity.

Duress (Coercion)

There are two types of duress that may be exercised against a party,- physical and economic.

Physical duress: Physical duress occurs when the party who has entered into a contract has done
so on the basis of violence or the threats of violence.

Economic duress: It has been difficult in the past for courts to set aside a contract for economic
duress as difficulties exist in establishing where business pressure in commercial dealings become
an actionable threat. Negotiations in commercial dealing are however legitimate therefore a criteria
was set out to give greater guidance as to the point where economic pressure amounts to duress:

a) Illegitimate pressure (which need not be unlawful), such as exerting unacceptable levels of
pressure which go beyond those normally expected in commercial negotiations;
b) Whether the party claiming duress demonstrated protestations against the contract; and
c) Whether the party had any alternative to proceeding with the contract, evidenced by the
availability of independent advice that could have been better informed by the claimant.

Undue Influence

The party who has been subject to undue influence may have the contract set aside by the courts.
It is in the exploitation of the power one party has over another that will make the contract
voidable, and this generally occurs when an individual‘s vulnerabilies are subjugated. The claimant
merely has to demonstrate that he/she would not have entered into the contract except for the
undue influence.

In the event of undue influence being established, the courts have the option to rescind the
contract.

Contracts are made up of various terms that identify the rights and obligations of the parties.
Terms of a Contract

A statement oral/written may become a term of a contract, or it is merely a representation that

never forms part of a contract. Or it may take the form of mere salesman talk, which has no legal
effect (mere puff).

If we were dealing with a term of a contract and it is not carried out then it‘s a breach of contract.

Terms of a contract can either be;

Express Terms: Express terms are, naturally, those that have been expressed in some form. Terms
may be outlined in a written form (perhaps in the contractual document, in correspondence
between the parties, or they may be identified from the oral negotiations between the parties.
Being expressed in such an open way, they are often the most important terms and contain key
elements to the contract (the item to be sold, the price to be paid and so on).

Implied Terms:

Whilst terms are expressed in a contract, it would be impossible to include every element of the
contract in a written document or an oral negotiation. Some terms may be necessary to make the
contract work; some may be so obvious that they don‘t need to be expressed. Terms are implied
into contracts by the courts, through customs and statutes that must be appreciated to understand
the obligations on parties, and their rights under the contracts.

Discharge of Contract and Remedies for Breach

A contract establishes the rights and duties of the parties and where successfully completed, the
parties will be considered to have discharged their responsibilities. This is however not the only
way in which the contract may be discharged.

Discharge of Contract

Under the normal rules of contract, a party is only discharged from a contract when he/she has
completed his/her obligations under it (complete performance). Having completed the contract
each party is free of further obligations. A failure to complete the contract may lead to a breach of
contract claim, although situations exist where the parties may release each other from further
obligations (discharge by agreement) or the contract may have been partially or substantially
performed. Methods of discharge of contract are;

Discharge through performance

The most obvious form of discharge is through the parties‘ completion of their obligations (the
contract being performed). Where complete performance has not been achieved, the courts have
to develop rules on what implications such a situation will have for the parties.

Part-Performance: There may exist situations where a contract is not fully completed, and the
other party voluntarily accepts the partial performance. It must be noted at this stage that the
acceptance must be undertaken voluntarily for it to be valid.
Substantial performance: If on the other hand, a substantial proportion of the contract has been
completed, the innocent party has an obligation to pay, taking into account the shortcomings of
the contract.

Discharge through Agreement

The parties may agree between themselves that they no longer wish to continue with the contract,
and therefore release each other from their obligations. There may be a unilateral or bilateral
discharge of the contract.

Unilateral Discharge: If one party has completed his/her part of the contract and the party wishes
to be released from his/her obligations which are outstanding, such an agreement will be allowed,
but only legally binding, if consideration (a benefit) is provided.

Bilateral Discharge: If both parties have obligations outstanding under the contract, then if both
agree to release each other from other obligations, the contract will be discharged by this mutual
exchange of promises. That both parties release each other will be good consideration and stop any
legal rights under the contract.

Discharge through Frustration

Frustration was a doctrine developed by the courts in order to offer relief in circumstances
whereby a contract could not be performed or had become radically different from that
contemplated (and this was the fault of neither party). The effect of frustration result in the parties
being discharged from any further performance in the contract and any money paid is returned( at
the discretion of the court). Some of the common themes that aid in identifying what may be held
to be frustration.

 The subject matter of the contract ceases to exist: in a situation where the subject matter
of the contract has ceased to exist before the contract has been performed, and it is neither
party‘s fault that this has occurred, then the courts consider this frustration.
 A person engaged under a contract of personal services becomes unavailable: If a person
has personally agreed to perform a contract and subsequently he/she becomes unavailable
then this may constitute frustration. Whether it will invoke frustration depends upon the
length of the time the person is unavailable. If it is a temporary situation such as a short
illness then this will not be frustration, but if the person is dead or is permanently
unavailable them this will frustrate the contract.
 An event central to the contract has not occurred: If parties contract for a specific event
and for some reason this event does not take place, the contract will be frustrated.
 The contract cannot be performed in the manner specified: if the contract is specific
about the manner in which it must be performed, and this cannot be complied with, the
contract will fail due to frustration.
 If the contract becomes illegal to perform: If the parties have to a contract, but before the
contract is due to be performed it subsequently becomes illegal, then the contract is
frustrated.
  The contract becomes radically different: The previous examples have demonstrated
where the contract could not be completed due to some event or circumstance. It is also
the case that if the contract was to be radically different from that which was envisaged
when the contract was performed, this may constitute frustration.
 The limits to frustration: The previous examples have demonstrated that there may be
many reasons why a contract may be frustrated, but an essential factor is that it must not be
the fault of either party. Simply because the contract cannot be performed will not result in
it being frustrated. If one parties has deliberately or negligently led to the contract failing,
he/she must accept the loss and/or compensate the innocent party.

Force majeure clauses

To ‗protect‘ themselves against a frustrating event ending the contract, the parties may establish a
force majeure clause that makes provision for the frustrating event. This clause involves some level
of foreseeability as to the possible frustrating event that was in the contemplation of the parties at
the time of contracting. Examples may include provisions for bad weather, difficulties in supplies
of labour and so on. Such clauses are valid and will be accepted by the courts if (1) it is the true
intention of the parties and (2) the clause is not designed to limit one of the parties‘ exposure to
liability for breach.

The Effects of Frustration

When the court has determined that a contract has been frustrated, the contract ceases to exist as
soon as the frustrating event occurs. Where, before the frustrating event, one of the parties
received a valuable benefit (other than a payment of money), the other party may claim (a return)
its value.

Discharge through breach of contract

If one of the parties breaches his/her obligations under the contract, then the other party must
ascertain whether the breach of the term was due to a condition or warranty. A breach of a
condition gives the injured party the option to end (repudiate) the contract and claim damages. In
some instances it may be advantageous for the injured party to claim damages but also to continue
with the contract. In the case of a warranty, as it is a lesser term it entitles the injured party to
damages, but he/she must still continue with the obligations under the contract.

In the event that the full contractual obligations owed by one of the parties are not fulfilled, or the
performance is substantially less than could be expected, the innocent party may treat this as a
complete breach of the contract.

Remedies for breach of contract

In the event that a contract is not performed, or obligations under the contract are not fulfilled,
the innocent party may be entitled to compensation. Under the common law, this is usually in the
form of damages (a money payment), but may also involve equitable remedies of specific
performance, injunctions and rectification.
Damages

Any breach of contract entitles the injured party to damages. Damages (a money payment),exists to
compensate the injured party for any losses sustained under the breach of the contract. The
purpose of damages is to either place the injured party in the position they would have been had
the contract been completed or place the injured party in the position he/she would was before
the contract had begun.

Equitable remedies for breach of contract

The courts will generally provide damages as a remedy for breach of contract wherever possible (as
this is usually the simplest form of a remedy as it is a money payment). However, there are
occasions where money would not provide an appropriate remedy, or would be unjust due to the
nature of the breached contract. This has led to the development of equitable remedies that are
awarded at the court‘s discretion.

Specific Performance: Specific Performance is a remedy that is available when monetary damages
are insufficient and do not adequately compensate the injured party for his/her loss. This is a
court order compelling the party in breach to perform his/her contractual obligations. As the
remedy is only available where monetary damages are inadequate, it is an order generally where the
subject matter of the contract is unique such as the sale of land or antiques which by their nature
cannot be replaced. Specific performance is restricted in use, and complements the other equitable
remedy of injunctions as ensuring fairness is achieved in breaches of contract

Injunctions: There are two main types of injunction available to the courts- mandatory injunction
and prohibitory injunction (although interim injunctions may be granted prior to a full hearing to
prevent injury to the claimant). Mandatory injunctions require the party compelled to perform the
contract, whilst the more common type is a prohibitory injunction, which stops a party from
breaching the contract. It is a valuable mechanism in ensuring that a party does not breach the
contract although as with specific performance, it will only be used where damages would be
inadequate and issuing of the injunction must be reasonable.

Rectification: This remedy enables a written document (such as contract) to be changed (such as
including/removing of clauses) to more accurately reflect the terms that were identified in the oral
agreement subsequently reduced in writing. In order for a claim for rectification to succeed, the
parties must have established an oral contract that identified the terms of the agreement; these
terms did not change from the oral agreement until it was written; and the written contract does
not accurately provide what was stated in the oral agreement. The remedy allows the written
document to be altered to reflect what the parties agreed orally, but this will only allow the
document to reflect this oral agreement, not what one of the parties wanted to have included.
Rectification may also be available where one of the parties believes that the contract reflects the
intentions of the parties, but it does not, and the other party is aware of this mistake.

LAW OF TORTS

A tort is a civil wrong for which a remedy, usually compensation, is available to the wronged
person in the civil courts. In the Law of Torts, duties are owed to persons in various circumstances,
and liability for negligent or wrongful action is imposed by law. For example, a duty of care to
other road users is imposed by law on all drivers. An occupier of property owes a duty of care to all
visitors in his premises. This is different from obligations in a contract where the parties
voluntarily agree to be bound. The occupier of property and the driver of a vehicle cannot escape
liability for breaching their duties, although they may be able to cover losses through insurance.
Where persons are insured, the insurance company usually ‗steps into the shoes‘ of the insured
and, in the event of a legal action, it is the insurance company that settles any claims.

The primary function of the Law of Torts is to provide remedies to claimants who have suffered
harm, loss or an infringement of rights. The harm includes physical injury to persons or property,
damage to persons‘ reputations or financial interests, and interference with persons‘ use and
enjoyment of their land. However just suffering a loss does not necessarily mean the law will
provide a remedy; a claimant must show that the person committing the tort owed them a duty of
care and that the tort caused the loss.

The law of torts covers a range of different civil wrongs including negligence, trespass, nuisance
and defamation. Each tort has its own rules about liability but most torts require an element of
culpability, which means that liability is only imposed on a person who intentionally or negligently
acts or fails to act in a particular manner.

Usually to succeed in a tortious claim, a claimant must prove that the tortious act or omission
caused some damage (although there are a few torts such as trespass where the claimant does not
have to prove he suffered actual damage). There are various defenses to an action in tort. Some are
called general defences because they apply throughout the Law of Torts, and other defences are
called specific defences because they apply to a particular tort.

Contract and Tort

A tort can be defined as a civil wrong which is not a breach of contract. This definition makes it
plain that civil liability can be broadly classified into two types: liability arising in contract and
liability arising in tort. Liability under a contract is liability voluntarily undertaken, and that is
undertaken because something (the other party‘s consideration) is given in return. Liabilities given
under a contract will be given in exchange for the rights which they gained under the contract.

Liability in Tort is not undertaken voluntarily. It is imposed by the courts who have decided that
certain types of behavior give rise to tortious liability. If a person injures someone else by such
behavior the injured person may sue. For example if a driver runs over a pedestrian while driving
badly, then the injured pedestrian will be able to sue the driver for the tort of negligence. The
driver has no choice about whether or not to accept such liability, the courts will impose it. Nor
will the driver have received any benefit in return for accepting the liability. It will have arisen not
as a result of a bargain but as a consequence of having committed a tort.

Another difference is that liability in contract is generally strict, whereas liability in tort is almost
always based on fault. A shop which sells packaged goods which are not of satisfactory quality is
liable for breach of contract even though it was not the shopkeeper‘s fault that the goods were
unsatisfactory. But liability in tort is imposed only when a person‘s conduct does not match up to
an objective, reasonable standard. So a driver who runs over a pedestrian will only be liable only if
he/she drove badly or failed to take reasonable care.

Contract remedies and Tort Remedies

Both the breaching of a contract and the commission of a tort give rise to liability in damages.
However, the purpose of contract damages is not the same as the purpose of tort damages. Both, of
course are designed to compensate. Contract damages achieve this by putting the injured party in
the position he or she would have been in if the contract had been properly performed, therefore
including damages for loss of profit. Tort damages achieve it by putting the injured party in the
position he or she would have been if the tort had never been committed, looking at expenses
incurred and injuries suffered.

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. Act Of God

Where damage is caused directly by natural circumstances which no human foresight can provide
against and of which human prudence is not bound to recognize the possibility, the defense of act
of God applies.

For this defense to succeed it must 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 V Burnett.

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 neighbor 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 neighbor 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.

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.

Effects of Res Ipsa

 a. It provides prima facie evidence on the part of the defendant
b. 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.

The defendant is however 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.

Defamation

Defamation is the publication of a statement which reflects on a person‘s reputation and tends to
lower him in the estimation of right- thinking members of the society generally or tends to make
them shun or avoid him.

Defamation is sometimes defined simply as the publication of a statement which tends to bring a
person ―into hatred, contempt or ridicule‖; but this is not quite exact for a statement may possibly
be defamatory even if it does not excite in reasonable people feelings quite so strong as hatred,
contempt or ridicule and the definition is defective in omitting any reference to the alternative of
tending to shun or avoid him.

This addition is necessary, for falsely imputing insolvency or insanity to a man is unquestionably
defamation, although, far from tending to excite hatred, contempt or ridicule, it would rouse only
pity and sympathy in the minds of reasonable people, who would nevertheless be inclined to shun
his society.

The tort of defamation is of 2 kinds:

o Libel
o Slander

DIFFERENCES BETWEEN SLANDER AND LIBEL

In libel – the defamatory statement is made in some permanent form such as writing, printing,
and pictures

In slander – The statement is made in spoken words or in some other transient form whether
visible or audible such as gestures or inarticulate but significant sounds.

There are however clear differences between Libel and Slander;

1. Libel is defamation in permanent form whereas Slander is defamation in transient form.

2. Libel is not merely actionable as a tort but is also a criminal offence whereas Slander is a
civil wrong only.
3. All cases of Libel are actionable per se but Slander is only actionable on proof of actual
damage with 4 exceptions under the Defamation Act, which are actionable per se.
Essentials of Defamation Generally

Whether defamation consists of Libel or Slander the following requisites are common to both, and
must be proved by the plaintiff.

i. The words must be defamatory

ii. They must refer to the plaintiff
iii. They must be maliciously published.

1. The words must be Defamatory

A defamatory statement is one which has a tendency to injure the reputation of the person to
which it refers. The statement is judged by the standards of the ordinary right thinking members of
the society and the test is an objective one.

It is no defence to say that the statement was not intended to be defamatory, a tendency to injure
or lower the reputation of the plaintiff is enough and a statement may be defamatory although no
one to whom it is published believes it to be true.

2. The Words must refer to Plaintiff

The defamatory statement must be shown to refer to the plaintiff. A court has power to dismiss an
action on the ground that no reasonable person could conclude that the plaintiff should be
identified with the person mentioned in the statement complained as a defamatory.

If the plaintiff is mentioned by name, there is usually no difficulty. It is however sufficient in such
a case the statement was understood, even by one person, to refer to the plaintiff, even though it
remained hidden to all others.

The question is not whether the defendant intended to refer to the plaintiff but is whether any
person to whom the statement was published might reasonably think that the plaintiff was referred
to.

3. The words must be ‘maliciously’ published

Publication is communication of the words to at least one person other than the person defamed.

Communication to the plaintiff himself is not enough for defamation constitutes injury to one‘s
reputation, and reputation is what other people think of a man, not his own opinion of himself.

It is normally said that the words must be published maliciously but this is purely formal, and is
usually inserted in the plaintiff‘s statement of claim for the purpose of inflating damages where
there has been spite of deliberateness. Express statements made in the sense of spite or ill motive
will usually defeat the defenses of fair comment and qualified privilege.

Communication between spouses about a 3rd party is not publication. This is explained by the
fiction of unity between husband and wife. A communication by a third party to one spouse about
the other is however publication.
The burden of proof of publication is on the plaintiff but in many circumstances this burden is
eased by certain rebuttable presumptions of fact e.g. an open postcard or a telegram message is
deemed to have been published to those who would, in the ordinary course of transmission,
normally see it.

Spoken words are deemed to have been published to people within earshot.

Repetition of a Statement

One who repeats a defamatory statement made by another person is liable for the repetition and
this constitutes a fresh publication even though the person does not know that the statement is
defamatory.

However, the original maker of the statement is liable for such re-publication if he has authorized
it or if it seems reasonably foreseeable.

Defences of Defamation

1. Unintentional Defamation

Under common law, the fact that the maker of a statement was unaware of the circumstances
making it defamatory does not absolve him from liability. The Defamation Act seeks to redress this
situation by enabling the defendant to make an ‗offer of amends‘ for the innocent defamation.

Under the Act, words shall be treated as innocently published in relation to another person if and
only if:

1. The publisher did not intend to publish them of and concerning that other person, and did
not know of circumstances by virtue of which they might be understood to refer to him; or

2. The words were not defamatory on the face of them, and the publisher did not know of
circumstances by virtue of which they might be understood to be defamatory of that person, in
either case, the publisher has exercised all necessary care in relation to the publication.

The Defamation Act provides further that an offer of amends is an offer;

a. In any case to publish or join in the publication a suitable correction and apology;
b. Where copies of a document or record containing the words have been distributed by or
with the knowledge of the person making the offer, to take such steps as are reasonably
practicable on his part to notifying persons to whom copies have been so distributed that
the words are alleged to be defamatory of the party aggrieved.

If the offer of amends is acceptable by the party aggrieved, and duly performed, no proceedings for
Libel or Slander may be taken or continued by that party making the offer in respect of the
publication in question.

If the offer of amends is not accepted by the party aggrieved, then it is a defence in any
proceedings by him for the Libel or Slander to prove that:
 1. The words were published innocently in relation to the plaintiff
2. The offer was made as soon as it practicable after the defendant received notice that they
were or might be defamatory to the plaintiff; and
3. The words were published without malice.

This provision of the Defamation Act is said to have mitigated the rigidity of Common Law only
partially as an offer of amends has so many qualifications and technical requirements that it is
unlikely that it will avail many defendants.

2. Consent and Assumption of Risk

If the plaintiff expressly or impliedly assents to the publication of the matter which is true on the
face of it, the defendant is not liable; and this is so even if it appears that some persons may
interpret the statement in a sense much more prejudicial to the plaintiff that is warranted by the
plain meaning of the words.

The defence of consent has been regarded as an instance of voluntary assumption of risk (volenti
non fit injuria).

3. Justification or Truth

The plaintiff does not have to prove that the statement complained of was false. On the contrary
the burden is on the defendant to prove that the statement was true.

Truth is a defense because the law will not permit a person to recover damages in respect of any
injury to a character, which he either does not have or ought not to possess.

The defendant must establish the truth of the precise charge that has been made which is
ultimately a matter of interpretation of the facts.

One difference between the defence of justification and the defenses of fair comment and
qualified privilege is that even malice on the part of the defendants does not deprive him of the
defence of justification.

4. Fair Comment

This defence stems from the belief that honest and fair criticism is indispensable in every freedom
loving society. The law weighs the interest of the plaintiff against the freedom of speech and it is
for the judge to rule whether any comment was called for in particular situation and to say
whether the statements are of facts or opinions, and if they are opinions, whether they are honest
and fair.

The requirements of this defence are as follows:

1. Public interest

The matter commented on must be of public interest. Matters of government, National and Local
Management of public and religious institutions, the conduct of foreign policy and even the
behavior of holders of public office are matters of public interest.
2. The comment must be an opinion on true matters

Fair comment is available only in respect of expression of opinion. In fair comment it is not
necessary to prove the truth of the comment, but that the opinion was honestly held. The defence
of fair comment only lies on facts which are proved to be true, and on statements of facts not
proved to be true but which were made on the privileged occasion.

The comment itself need not be true, though. It must be honestly made, but the facts upon which
the comment itself need not be true unless they are privileged. If the facts are untrue, the
defendant will not succeed in fair comment merely by proving that his comment is honestly made.

3. The comment must be fair

The comment must be honest and not actuated by malice. For comment to be fair it must first be
based upon true facts in existence when the comment was made.

One cannot invent untrue facts about another then comment on them. The fair comment may
however be based on an untrue statement which is made by some people upon a privileged
occasion e.g. a statement of a witness in the course of judicial proceedings, and properly attributed
to him. The comment held should however be based on the untrue statement of another person,
not the person making the comment.

4. Absence of malice

The defence will be defeated by proof of malice, which here means, ―evil motive or spite.‖

5. Privilege

There are two categories of privilege:

1) Absolute privilege
2) Qualified privilege

1. Absolute Privilege

A privileged statement may be defined as one which is made in such circumstances as to exempt
one from the rule that a person attacks the reputation of another at his own risk.

A statement is said to be absolutely privileged when it is of such a nature that no action will lie for
it, however false or defamatory it may be and even though it is made maliciously. The defence is
available in the following cases:

a) Any statement made in the course of and with reference of judicial proceedings by any
judge, jury, party, witness or advocate.
b) Fair and accurate report in any newspaper of proceedings heard before any court.
c) Any statement made in parliament by a member of parliament
d) Reports, papers, votes and proceedings published by the order and / or under the
authority of the National Assembly.
e) Communication made by one officer of state to another in the course of his official duty.
 f) Communication between an advocate and his client in connection with litigation.
g) Communication between husband and wife.

2. Qualified privilege

It is limited in scope. When an occasion of qualified privilege exists, a person, provided he is not
actuated by malice is entitled to make defamatory statements about another. Like absolute
privilege, here the right freedom of speech prevails over the right of reputation but only to a
limited extent.

The statement must be made honestly and without any indirect or improper motives. Qualified
privilege is thus an intermediate case between absolute privileges but only to a limited extent.

The general principle is that the statement is protected if it is fairly made by a person in the
discharge of some public or private duty whether legal or moral or in the conduct of his own
affairs in maters where his interest is concerned.

No complete list of such occasion is possible but it is generally agreed that the main instances are:

a) Statements made in the performance of a duty;

A statement is conditionally privileged if this is made in the performance of any legal, social or
moral duty, imposed upon the person making it. The privilege is that of the publisher, the person
to whom the statement is published needs no privilege because he commits no tort. Never the less
it is essential that the person to whom the statement is made has a corresponding interest or duty
to receive it. This is not to say that both parties must have a duty or both an interest; one may
have an interest and the other a duty.

The duty needs not be one enforceable by law, it is sufficient that by the moral standards of right
conduct prevalent in the community, the defendant lay under an obligation to say what he did. It
is not enough that he believed himself to be under such duty / obligation; it is for the judge to
decide whether on facts such a duty existed.

b) Statements made in protection of an interest

Even when there is no duty to make the statement, it is nevertheless privileged if it is made in the
protection of some lawful interest of the person making it, e.g. if it is made in the defence of his
own property or reputation but here also there must be a reciprocity i.e. there must be an interest
to be protected on one side and a duty to protect that interest on the other.

c) Fair and accurate reports of parliamentary proceedings

This qualified privilege protects the advantage of publicity against any private injury resulting from
the publication. It is not limited to newspaper reports and covers other reports e.g. Broadcast
reports. In order to qualify as fair and accurate the report does not have to be a full précis of the
debate; a ‗parliamentary sketch‘ may properly select those portions of the debate, which will be of
public interest. What matters is whether the report is fair and accurate in so far as the debate
concerned the plaintiff‘s reputation.
d) Communication between advocate and client

This is covered by both qualified and absolute privilege. Professional communication between an
advocate and client in connection with litigation is absolutely privileged.

Other communications which have nothing to do with litigation e.g. the drawing of a client‘s will
are covered by qualified privilege. The general restriction is that the communication has to be a
professional one for it to be privileged and also that the relationship of advocate – client must be
proved.

Malice

The defence of a qualified privilege is negated by malice. Malice means the presence of improper
motive or even gross and unreasoning prejudice. A statement is malicious if it is made for some
purpose other than the purpose for which the law confers the privilege.

The law requires that a privilege shall be used honestly, but not that it should be used carefully.

LAW OF AGENCY

Agency has been defined as a legal relationship that exists between two persons where one called
the agent is considered in law to represent the other called the principal in such a way as to affect
the principal‘s legal position in relation to other parties.

Definition of Agency

An agent is a person employed to do any act for another or to represent another in dealings with
third persons. Cap 23 Laws of Kenya is the law that governs Agency law in Kenya. The Law of
agency is based on the common law rules developed by English courts and rulings made by other
courts in the commonwealth.

The law of agency prescribes the legal rules for determining-

a. How a person may become an agent;

b. The rights and duties between the agent and the principal;
c. The relations between the agent and the third party: and
d. The manner in which the relationship between the agent and the principal may be brought
to an end.

It should be noted that the relations between the principal and the third party are governed by the
ordinary principles of the law of contract.

In agency law we have 3 parties:

1. The principal: person who owns the goods or who hires or employs the agent; usually the
principal and the agent enter into a contract where the principal gives consent for the
agent to do whatever representation that the principal wants the agent to do for him. This
is a complete contract unto itself.
 2. The agent: this is the person employed or authorised by the principal to act for him. The
principal goes through the agent and the agent is the one who buys/sells the goods to 3rd
parties with the authority of the principal. When the Agent is selling those goods to a third
party, then there is a sales contract that is governed by the law of contract and both the
agent and the 3rd party must meet all the requirements of a contract. This is another
contract.
Note that the agent can only perform those acts which the principal is legally able to
perform.
3. The 3rd party: this is the buyer/seller. In Agency Law the Agent can disappear after
connecting the principal and the 3rd Party. The time of termination of the contract is
crucial. If by the time the Agent sells/buys the goods he has been already deprived of the
authority by the principal, then the contract is not legal. The principal would however still
be liable. If the Agent or the Principal are declared insane, the contract is terminated.

Characteristics of Agency

i. The agent performs a service for the principal

ii. He represents the principal
iii. Acts of the agent affect the legal position of the principal

Concept of authority

In agency law, the terms ‗authority‘ and ‗power‘ are sometimes used synonymously particularly
with regard to the scope of the agency relationship. Authority is the oral or written permission
conferred upon a person by another to do a particular thing. It is a factual concept and may create
power. Power on the other hand is the ability of the agent to affect the legal position of the
principal in relation 3rd parties. It is a legal concept and exists independent of authority.

The agent has 3 types of authority

a. Actual authority: this is authority actually given to the agent by the principal e.g. I
am authorising you to take my cow to the market. It may be written or oral.
b. Ostensible or apparent authority: This is the authority which in fact the agent has
not been given by the principal but which he appears to have by reason of the
principal‘s conduct. e.g. a driver can ask a petrol station attendant to fill the tank
and the owner will be liable to pay for the fuel
c. Resumed authority: This is the authority which the law deems the agent to have.
It is conferred upon the agent by law. It is not given by the principal nor is it based
on the principals‘ conduct. It is the authority exercised by agents of necessity and
from cohabitation.

CREATION OF AGENCY

An agency may arise in the following ways:

1. Appointment (Contract) or agreement

This can be done in any way: orally, in writing or partly orally and partly in writing. However,
when the agent is required to execute a deed on behalf of the principal, he must be appointed
using a deed called power of attorney. Such instances include sale or lease of land.

2. Estoppel

In the context of the law of agency, a person who is under a legal duty to inform a third party that
the person purporting to act for him as his agent is in fact not his agent but fails to do so may be
"stopped" from denying that the apparent agent is actually his agent.

For estoppel to apply:

i. The third party must have relied on the presentation

ii. Change in the legal position as a result of the reliance
iii. It would be inequitable to a 3rd party if the agency is not presumed.

Another example of agency by estoppel is the liability of a partner for the debts incurred by the
firm after leaving the firm if the parties who knew him to be a partner dealt with the firm without
being made aware that he had left it.

3.Ratification

This occurs when someone adopts a transaction which someone had concluded for him as his
agent but without his express authority. The person who adopts the transaction becomes a
principal as if he had initially authorised it (i.e. the ratification is said to be retrospective).

Agency by ratification can only arise if;-

1. The agent purported to act for a principal

2. The alleged principal was in existence at the time of contracting
3. The principal had capacity to enter into the contract.
4. The contract to be ratified is lawful.
5. The agent must have disclosed the principal and the disclosed principal is the same one
adopting the contract.
6. The alleged principal must have been made aware of all the material facts of the relevant
transaction before he decided to adopt the contract. If the apparent ratification is obtained
by a partial disclosure of relevant facts then it has no legal effect.
7. The contract must be ratified within a reasonable time.

4. Necessity

An agency of necessity may be either commercial or domestic.

Commercial agency of necessity: At common law, a person who is entrusted with "perishable"
goods of another is entitled, in certain circumstances, to do certain things in relation to the goods
as if he had been expressly authorised to do so by the owner. This will be so if:
 a) A genuine emergency arises and the goods are in danger of perishing or being destroyed
completely unless the contemplated action is taken.
b) It is impossible to communicate with the owner of the goods.
c) It was actually necessary to do what was done and the action taken was prompted by a
genuine desire to prevent the owner of the goods from incurring a financial loss as a
consequence of an imminent perishing or deterioration of the goods.

Domestic agency of necessity: A married woman who has been for all intents and purposes been
deserted by her husband can take necessities on credit for her personal use but as her husband's
agent. The husband will have to pay for the goods as if he had expressly told her to take them on
credit. This was established under common law.

She also has authority in equity to borrow money for the purchase of necessaries. Her husband
will be ordered to pay the loan. However, she can only take necessaries on credit or borrow money
for that purpose if she does not have adequate means of her own.

4. Presumed Agency or from Cohabitation

A woman who is living with a man is deemed to be his agent for purposes of obtaining necessaries
for the family. It should be noted that marriage is not essential for presumed agency to exist as it is
practically impossible for a businessman to differentiate a wife from a mistress. "Necessaries" will
depend on the standard of living set by the husband and not on the family's actual income.

TYPES OF AGENTS

Depending on the scope of their authority, agents may be general or special. An agent engaged to
perform a task in the ordinary course of his business as an agent is deemed general. An agent is
special if engaged to perform a task outside his ordinary course of business as an agent. Specific
agents include brokers, auctioneers, lawyers, ship captains etc.

Duties between Principal And Agent

Obligations of the agent

The duties of an agent to the principal are:

a) Care and skill – to exercise due diligence and to apply any special skill which he professes to
have. "Diligence' primarily means that the agent, when working for the principal, must exert the
same effort, or show the same enthusiasm, as he would have exerted or shown when acting in his
own affairs. An agent appointed to sell must endeavour to obtain the highest price possible, while
an agent appointed to buy must endeavour to buy at the lowest price possible.

b) To render an account when required in those cases where the agency entails keeping of an
account by the agent.

c) Not to become principal as against his employer or principal. In particular, an agent appointed
to buy property must not sell his own property to the principal and an agent appointed to sell
must not buy the property.
d) Obedience

e) Maintain an account separate from his own for the principal.

f) Keep the principal informed. A breach of the duty renders the contract voidable at the option
of the principal.

g) Not to make any secret profit: If he does:

 The principal may recover the amount of the secret profit from him.
 The principal may refuse to pay him the agreed commission
 The principal may dismiss him without notice, if notice is required to terminate his agency.
 The principal may sue the agent receiving and the third party giving the secret payment for
damages suffered.
 The principal may repudiate the contract, whether or not the secret payment had effect on
the agent.
h) Personal performance or non-delegation: Not to delegate his authority, unless the
delegation is in the ordinary way of business or is authorised by the principal. This rule is
expressed in the Latin maxim "delegatus non potest delegare" which is translated as ‗one to
whom power is delegated cannot himself further delegate that power‘
i) Confidentiality
j) To perform the duty set out by the principal.

Duties of the principal:

The duties of the principal to the agent are:

a) To pay the agreed commission when it becomes due strictly as agreed. An agent in possession of
the principal's goods may retain the goods as security for payment of outstanding commission.
This is called a lien but it does not confer power of sale of the goods in question.

b) To indemnify the agent for any expenses incurred in the execution of his mandate.

Relations between the agent and the third party

The legal effects of agency depend on whether or not the agent acted for a "disclosed principal".

If the agent acted for a disclosed principal by informing the third party that he was an agent acting
for a principal (whether named or unnamed) the general rule is that he drops out of the
transaction as soon as his offer has been accepted or conversely, he has accepted the third party's
offer. He is not personally liable under the contract and cannot personally enforce it in the event
of its breach. Only the principal can sue or be sued thereunder. However, an agent would be
personally liable if:

a) He executes a deed in his own name.

b) Principal does not exist or, where he does, he has no capacity to trade.
c) He signs a bill of exchange in his own name without indicating that he is acting as an
agent.
 d) He contracts as an agent but is in fact a principal.
e) If the custom of particular trade makes him liable.
f) If an agent lacks authority or exceeds his authority (express or implied) he will be liable to
the third party for "breach of warranty of authority".

If the agent acted for an undisclosed principal (i.e. a principal whose existence the third party
was unaware of because the agent did not say that he was contracting as agent):

a) Either the agent or principal but not both can sue a third party who does not perform as
contracted.
b) If the contract is breached by the principal the third party may sue the agent or the
principal but not both. Once he commences a suit against one, he cannot abandon it in
order to sue the other.

Termination of Agency

An agency relationship may come to an end by:

a. Mutual consent
b. Withdrawal of consent
c. Performance of the agreed activity
d. Bankruptcy of the principal
e. Frustration
f. Death of the principal
g. Insanity of the principal
h. Lapse of time

Copy protected with Online-PDF-No-Copy.com