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General Introduction to Law

I.1. DEFINITION OF LAW

Law is a set of rules for the guidance of human conduct which are imposed upon and
enforced among the members of a given state. Thus, rule is essentially a directive, or an
order.

I.2. Branches of Law

Among branches of law, two major fields can be distinguished: private law and public law.
The difference between these two branches lies mainly in the parties of the legal
relationship in question.

 Private law is concerned mainly with matters that affect rights and duties of
individuals among themselves. Here the state leaves it to the individual whose rights
have been infringed to take action, and lays down the steps, such as claiming
damages, that citizens can take to protect their interests. It covers different matters
such Family law, Contract law, Property law, Land law, Succession law, Intellectual
property law, and Labor law etc…..

 Public law is a branch of law which is mainly concern with the principles that serve as
a basis for the structure of the state and the relationships between the state and the
citizens. In addition to constitutional law, public law also covers administrative,
financial, criminal and procedural law as well as international law. For the purpose of
this course much efforts will be devoted on the notion of private law
I.3.Importance of Private law
Life without basic laws protecting the rights of individuals would be bad and short. I.e.
jungles rule. Hence, the importance of private is to provide answers to the legal problems
that can arise because of the conflicting interests between individuals and legal persons
within the society inter alia:

1. Protecting basic freedoms;

2. Control of legal relations between individual;
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3. Procedures for the settlement of disputes;

4. Protect ownership and enjoyment of the use of property;
5. Provide the compensation of harm;
6. Reinforce and protect the family;
7. Facilitate social change etc……

1.Sources of Law
A. Laws
In the narrow sense, laws are statues enacted by the parliament and promulgated by the
President of the Republic. In the current usage however, the word law is used in broader
sense including the constitution and regulatory executive acts (acts of the executive power).
B. Custom
It is also a subordinate source of law. Custom plays a preponderant role in a legal system,
and in developing or applying the law, legislators, judges and authors are, as a matter of fact,
more or less consciously guided by the opinion and custom of the community. Custom is not
the fundamental and primal element of law; it is but one of the elements involved in
establishing acceptable solutions. Its status as a source of law is not to be contested.
In general, the custom or customary law is said to be a branch of law which involves
practices and usages of people of a given community and which have become socially
acceptable norms with a force of law. Such custom must be generally accepted by all the
members of the society concerned.
C. Jurisprudence
Jurisprudence or case law means in the wide sense, decisions of courts and tribunals. It is in
this sense we talk about collection of jurisprudence. Courts’ decisions as well as legislation
may have a lot of authority and a strong influence on the way law is perceived and
interpreted in legal practice. In a narrower sense, the word jurisprudence serves to mean the
way a given legal problem has been addressed or solved by the court.
D. Legal doctrine
By doctrine we mean legal scholars’ opinions on critical questions of law. In the wider sense,
doctrine refers to publications of persons deeply involved in the study of law. These are law
professors, lawyers, etc.
E. General principles of law
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Some unwritten principles are generally accepted in legal community as exercising influence
even to the legislator. He cannot easily depart from them and they inspire him/her in
legislation process. Those principles are called general principles of law. They are mostly
derived from existing elements of the legal system. It is certainly true that laws remain
above general principles of law so far as they have not been incorporated in legislation.
These are two of many general principles of law recognized in Rwandan law:
- none is presumed to be ignorant of law or “nemo censitur ignorare legem”;
- laws provide for the future “the principle of non-retroactivity”.
F. Equity
This is a body of rules created and based on the fairness and good conscience of judges.
Equity is generally recognized as an independent source of law;
II.1. GENERAL NOTIONS AND CLASSIFICATION OF CONTRACTS
The contract is a convention by which one or more people oblige, towards one or more
others, to give, do or not to do something. The contract normally is created and carried out
by the only force of a human initiative: it is the fundamental principle of the autonomy of
the will, with the significant consequences.
II.1.1.The principle of autonomy of will

According to the classical theory, the will is the fundamental element of the contracts. 1This
theory puts the individual at the center of the right. The principle of the autonomy of the will
means that the will creates its own obligation.
In this design, one could even say that the obligation is legitimate only if it is founded on the
will. The man is in the center of the creation of the obligations. The contract is thus forged
by the parts and not by the legislator. design was not expressly stated by the civil code, but it
shows through in several texts: article 6 of the Napoleon Code, according to which "one
cannot derogate, by particular conventions, with the laws which interest the law and order
and the moralities", legally subjacent with contract law which lays out: "legally formed
conventions hold place of law with those which did them", "conventions have effect only
between the contracting parts (…)".

1
B HESS-FALLON and SIMON A.-Mr., Civil law, 7 E éd., Paris, Dalloz, 2003, p. 197; N HEUDEBERT-HERDSMAN, Civil law and
commercial,5 E éd., Paris, PUF, 2002, p. 162.
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Consequences of the principle

One can indicate some several, among most significant:
- Any person is free; he/she can do what he/she wants and is free to regulate the
contents of its contract like its effects.
- Once that it is freely concluded, freely conceived, this contract is equivalent to the
law and is called convention-law or the law of the parts. Except legal causes, a part
cannot modify the contract with its own way. This contract cannot govern the foreign
people with him i.e. the thirds.
- The principal source of the obligations it is the contract.
- The majority of laws out of contractual matter are suppletive, interpretative of will.
They apply, because the parts wanted it; they interpret their wills. The parts can by
mutual agreement, to draw aside them and give to their contract different contents,
effects of those which are indicated in these laws. They can even create contracts not
envisaged by the law, contracts innommés.
- Consensualism: The contract is the work of the wills of the contractors, and these
wills only. No form of expression of this will is necessary in theory. The only exchange of
the assents is enough to create the obligation or to transfer from the rights.
II.1.2. Conditions of validity of contracts
Four mandatory conditions are required for a contract to be validly concluded: the consent
of contracting parties, their capacity to contract, a determined object of the contract and a
legal purpose.
A. Consent
The consent is actually a key element in the formation of contracts. It may take several
forms: it can be oral, written, implicit or explicit. The exchange of consent takes place in two
stages: initially an offer to contract must be made by one of the parties. Secondly, the other
party must indicate that the offer is accepted. A contract becomes complete when it is
accepted. Acceptance of a contract may be either tacit or explicit. However, unless
otherwise provided for by the law, the silence of an individual cannot be deemed to
constitute acceptance of an offer.
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Consent must be freely given, and must not be the result of any defect: Mistake,
Misrepresentation, duress or undue influence and threat.
Mistake
which car did he intend to sell?
‘Mistake’ is a belief that is not in accord with the facts. The cases on mistake as a vitiating
factor fall into two main groups: In the first, the parties make the same mistake: e.g. both
think that the subject matter exists when it does not; in the second, one of the parties is
mistaken.
Misrepresentation
Another factor affecting the validity of consent given by a contracting party is
misrepresentation, which prevents assent from being knowingly given.
A misrepresentation may be:
(1) a misleading conducts or an assertion that is not in accord with the facts;
(2) an action intended, or known to be likely, to prevent another from learning a fact;
(3) a person’s non-disclosure of a fact known to him/her, where he/she knows that
disclosure of the fact is necessary to prevent some previous assertion from being a
misrepresentation or from being fraudulent or material. 2
Duress
A person should not be held to an agreement he has not entered voluntarily. Accordingly,
the law will not enforce any contract induced by duress, which in general is any wrongful or
unlawful act or threat that overcomes the free will of a party.
Ordinarily, the acts of threats constituting duress are themselves crimes or torts. But this is
not true in all cases. The acts need not be criminal or tortuous in order to be wrongful; they
merely need to be contrary to public policy or morally reprehensible. For example, if the
threat involves a breach of a contractual duty of good faith and fair dealing, it is improper.
Undue Influence
Undue influence is unfair persuasion of a party who is under the domination of the person
exercising the persuasion or who by virtue of the relation between them is justified in
assuming that the person will not act in a manner inconsistent with the welfare of the party
being persuaded.3

2
Law governing contracts, Article 50.
3
Law governing contracts, Article 57.
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B. Capacity
According to the Civil Code, any person may validly contract, unless he or she is declared
incompetent (incapable). Thus there is a legal presumption that everyone is competent
(capable) to contract.
There are two forms of incapacity: incapacity to exercise rights and incapacity to enjoy
rights. A person may possess rights but be unable to exercise them. Such a person has not
been denied rights, but only denied the possibility of exercising them, generally in order to
protect his or her best interests. Such incapacity applies for a limited time period. The most
common form of incapacity to exercise rights is incapacity of minors. Legal acts that are
accomplished by a person who is unable to exercise rights are invalid (susceptible of nullity).
C. Object
All contracts must have an object, namely a thing which a party undertakes to give or an
action which a party undertakes to carry out or not to carry out. The object of a contract
may be sale, rental, exchange, etc. contracts are only valid to the extent that they are not
inconsistent with public safety and with good morals.
Example: it is forbidden to renounce to an estate that is not yet opened for settlement, or to
stipulate with respect to such an estate, even with the agreement of the individual
concerned.
D. Purpose/ Licit Cause
The final condition for the existence of a contract is a valid legal purpose (cause). An
obligation without a purpose, or for a purpose which is false or illegal, does not produce
effects. The purpose is the reason why a party has decided to become bound by the
contract. Purposes of contracts vary enormously, depending very much upon the individual.
In a bilateral or reciprocal contract, the purpose is the correlative undertaking assumed by
the other party. If the contract is one of sale, the purpose for one party will be the delivery
of a given item, and for the other party the payment of the price that was agreed upon. In a
gratuitous contract, the purpose is the intent to make a gift or donation in favour of another.
A contract is not void merely because the purpose is not expressed. As with the object of
contract, where the purpose is prohibited by the law or contrary to good morals, it is illicit.
II.1.3 Sanctions of legal acts
The non-compliance with one or more conditions of validity of legal acts leads to the
annulment of the concerned act. This nullity can be either absolute or relative. The absolute
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nullities concern public order, they are in principle invoked by all interested persons and the
public prosecution; they cannot be covered. The relative nullities protect private interests;
they are invoked only by the protected person and can have prescription.

II.1.4. Classification of contracts

Contracts may be classified in a number of ways.
A. A contract may be described as solemn or consensual
A solemn contract is that whose validity (existence) is subjected to some conditions
(formalities) prescribed by the law. The non-compliance with these conditions leads to the
nullity of the act.
Example: marriage contract
A consensual contract is that whose validity does not require any kind of formal conditions,
the existence of the consent of contracting parties, only matters; the form in which the
contract is expressed is of no importance.

B. A contract may be said be bilateral (reciprocal) or unilateral

A bilateral contract is a contract that requires each party to execute a commitment in favour
of another.
Example: employment contract. The employer is creditor of right to have work performed
and debtor of an obligation to pay the salary. The worker, employee is creditor to receive
the salary and the debtor of an obligation to perform the work.
A unilateral contract binds one or several persons to execute an obligation in favour of one
or several other persons, without the latter undertaking any commitment whatever.
Example: voluntary deposit by which the debtor undertakes to return something to the
creditor. This is a unilateral contract because the creditor has no obligation whatever.

C. A contract may be onerous or gratuitous

An onerous contract requires both parties to give or to do something.
A gratuitous contract does not require such equivalence. One of the parties receives an
advance at no cost or exchange.
Example: a gift or donation
A contract is commutative when it consists of an obligation upon each party to do or to give
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something that is viewed as being the equivalent.

A contract is aleatory when there is a chance of profit or loss for one of the parties based on
the concurrence of an uncertain event.
Example: the purchase of a lottery contract
A commutative contract can be set aside where it is abusive; which means when there is an
obvious discrency between the reciprocal advantages of parties, whereas there is no such
abuse in aleatory contracts because the risk of loss contemplated by parties.
D. A contract is named or unnamed
Named contracts are those specially designated in the Civil Code. They are governed by
special rules provided for each of them. These rules either replace or complete the general
rules for contracts provided for by the Civil Code.
Examples: a contract of lease, a contract of sale, a contract of exchange, a contract of loan,
etc.
Unnamed contracts are those not designated by the Civil Code. They are governed by
general rules of contracts. Parties are free to make any kind of contract provided that it will
be in conformity with imperative laws in contracts matter.
II.1.5 Classification of obligations

Obligations may be classified in on the basis of different criteria, e.g. in accordance with their
object, as regards the warranty attached to their performance, or in relation to their sources.
A. Obligation of means and obligation of result
Civil law makes a theoretical distinction between obligation of means and obligation of
result.
The obligation of means is that by which the debtor commits himself using of the adapted
means, to be careful and diligent in the achievement of a service, without guaranteeing a
given result. This is the case of a doctor who commits himself to provide to the patient care
diligence in order to heal the patient, without guaranteeing the latter, or of a lawyer who
promises to his client to do all the actions necessary in order to succeed in a case without
guaranteeing success of the case, or of a professor who commit himself to deliver his course
without guaranteeing correctly the success of his students.   
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The creditor of an obligation of means can only complain that the obligation is breached if it
can be shown that the debtor of that obligation was at fault, i.e., he did not exercise that
due care and diligence in effecting the said result. The obligation of result is that by which
the debtor commits himself to provide the promised service which consists of a given result.
This is the case of a contractor who commits himself to provide such work (for example, a
house) on a certain date, or of a driver who commits himself to drive a passenger or a thing
to a certain destination. Where the obligation is one of result, the debtor will be liable for its
breach where the result expected is not obtained, irrespective of the means used to affect it.

B. Personal obligation and real obligation

A distinction is also made between ordinary obligations and real obligations. An ordinary
obligation attaches itself to the assets of the debtor in general and its breach or in-execution
entitles the creditor to sue and recover against this general property. A real obligation on
the other hand is associated with a specific piece of property, which entitles the creditor of
that obligation to sue and recover against that specific property no matter who the actual
owner is.
C. Civil obligation and natural obligation
A further distinction is made between civil obligations and natural obligations. Non
compliance or in-execution of a civil obligation can be enforced by courts, whereas a natural
obligation is not enforceable under the law. It may be as a result of simply a moral but not a
legal obligation, for example payment of a debt that is time-barred by prescription, or paying
for a relative’s school fees or assisting a relative in general i.e. not those provided by the law.
ll.1.6. Sources of obligations
There are two basic categories of obligations, namely contractual obligations and extra
contractual obligations. Contractual obligations arise from contractual undertakings, where
parties to a contract agree or consent to perform certain acts with respect to each other,
whose effect is to create a legal bond between them. Contractual obligations are subdivided
into pure contractual obligations and quasi-contractual obligations.
Contractual obligations either arise from pure contracts such as contracts of sale, of
purchase, of rent, etc. or from the situations which, though not constituting contracts at the
outset, produce the same effects as the ones inherent from contracts. These are known as
quasi-contracts, e.g. management of another person’s business, undue payment or
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enrichment without a cause. Extra-contractual obligations arise, for example, from

negligence, unlawful acts or omissions (i.e. resulting from tort). Extra-contractual obligations
are subdivided into tortuous and quasi-tortuous obligations.
-Example of tortuous civil liability obligations is civil action arising from intentional homicide,
voluntary injury, etc. (Art. 258 CC B II);
-Examples of quasi-tortuous (non-intentional) civil liability/obligation is negligence, civil
action arising from non intentional homicide (manslaughter), involuntary injury, etc.
It should be noted that this last type of obligations will not be part of this course. Regard
shall only be had to contractual and quasi-contractual obligations.
II.2. Offer and Acceptance
There are different basic essentials to creation of a contract which will be recognised and
enforced by the courts. In this point is concerned with the means by which the courts
ascertain that the parties have, in fact, reached agreement. The method traditionally
adopted is to analyse the dealings between the parties in terms of offer and acceptance.
II.2.1. The offer
The offer is an expression of willingness to contract made with the intention (actual or
apparent) that it shall become binding on the offeror as soon as it is accepted by the person
to whom it is addressed. An offer can be made to one person or a group of persons, or to the
world at large. The offeror is bound to fulfil the terms of his offer once it is accepted.
The offer may be made in writing, by words or conduct. All that is necessary is that the terms
of the offer are clear and that the offer was made with the intention that it should be
binding if accepted.
Types of offer: Unilateral
Some offers are purely one sided. They are made without the offeror’s having any idea
whether they will ever be taken up and accepted, and thereby be transformed into a
contract. Such an offer is said to be unilateral.
Types of offer: Bilateral
The majority of offers are bilateral. Most contracts are negotiated on a promise for a
promise basis. While it is not always true, most people make an offer to one named offeree
or, at most, a small group of potentially interested parties. Again it is not always the case,
but many contracts are made with both parties present on a face-to-face basis. Thus an offer
to sell a house involves a promise by the offeror to sell, in return for the offeree’s promise to
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pay. Similarly, an offer to build a house involves the builder’s offer to construct the house in
return for the customer’s promise to pay for it. These are both examples of bilateral offers.
II.2.2. Duration and termination of offer
An offer continues in existence, capable of acceptance until it is brought to an end. There are
different ways in which this can occur.
Revocation
The offer may be revoked by the offeror at any time up until it is accepted. The only
requirement imposed on the offeror is that the revocation of the offer must be
communicated to the offeree. Unless and until the revocation is so communicated, it is
ineffective. There must be actual communication of the revocation
Rejection by the offeree
An offer that is rejected by the offeree cannot be subsequently accepted by him, once the
rejection has been communicated to the offeror.
Lapse of time
Where an offer is started to be open for a specific length of time, then the offer
automatically terminates when that time limit expires. Where there is no express time limit,
an offer is normally open only for a reasonable time. What constitutes reasonable will
depend largely on the subject matter of the proposed contract.
Occurrence of a terminating condition
An offer may be made subject to a condition. If that condition is not satisfied, the offer is not
capable of acceptance. Examples of such condition are that the offer must be accepted
within a stated time or, in an offer to sell goods, that the goods are in a saleable condition or
that an applicant for life insurance is in the same state of health as he was when he made his
applicant.
Death
The effect of the death of the offeror depends upon the nature of the offer. If it involved the
performance of a promise which was personal to the offeror, such as writing a book or
singing at a concert, then the offer cannot be accepted once news of the death has been
communicated to the offeree. There must be actual communication. Where the offer was
not dependent upon the offeror personally, then his death has no effect, and the offer
remains capable of acceptance, and if accepted, is binding upon the estate of the offeror.
II.2.3. Acceptance
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An acceptance is a final and unqualified acceptance of the terms of an offer. Unless it can be
shown that there was such an acceptance, there is no contract. Where the offeror sets out
his offer and requests an answer of yes or no, from the offeree, it is not difficult to
determine whether or not there has been acceptance.
An acceptance of a bilateral offer normally takes the form of words, either spoken or
written. But in the case of unilateral offers, that is, the offer of a promise in return for the
performance of some act by the offeree, the offeree’s performance of that act is the
acceptance of the offer.
II.3. Quasi-contract
The Rwandan civil code considers quasi contracts as an autonomous source of obligations, as
contracts.
According to the Rwandan civil code, there are two forms of quasi contracts, namely,
payment or restitution of an undue debt and management of another person’s affairs
(business).
However, there is another form of quasi contract found in other systems of law that we
don’t find in ours, which we shall also examine, namely, enrichment without cause (unjust
enrichment).
II.3.1. Management of another person’s affairs (business) (Negotiorum gestio)
This is provided by articles 248-251 of the Rwandan civil code book III. By business
management is meant the fact that one person voluntarily assumes the management of
some activity or enterprise of another. We note that this obligation is a result of the will of a
single individual. It is not a real contract because there is no agreement between two
persons.
The owner of the business or enterprise does not normally consent formally, and he or she
may or may not be aware of the intervention.
The Rwandan civil code views such activity as a form of tacit mandate or agency. The person
managing the business (we may call him the manager) must intend to assist the owner of the
business, and must not simply be acting in his or her own interest. The management must be
useful and opportune (appropriate) (article 248 CCB III).
Such a quasi contract would arise, for example, where one neighbor repairs the leaky roof of
another neighbor’s house, where the latter is absent and cannot tend to his property. In this
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case, one neighbor voluntarily assumes the obligation, but without the other neighbor’s
consent.
We note also that the neighbor who assumed that responsibility was not required by law or
contracts to take on the responsibility but once this has been done, he or she is bound to
execute the obligation responsibly, according to the rules set out in the Rwandan civil code.
Upon the conclusion of the quasi contract, that is, once the owner has again assumed full
responsibility, for his of her property, the manager is entitled to be reimbursed for useful
and necessary expenses (article 251 CC III).
Other examples of management of another person’s affairs are the following:
- A person who hires plumbers or electricians to fix sanitation or electricity of another
person’s house because he sees it in danger of damage by water or electric fire (and
burning),
- A person who is a co-owner of an adjoining building with another person that repairs it
without the other’s consent,
- A medical doctor who, on his own initiative, after realizing that a patient needs an urgent
operation and goes ahead to hire a specialist for the operation,
-A neighbor who, after realizing that perishables belonging to his neighbor who is absent,
goes ahead and sells them to stop them from destruction, etc.
Conditions for this quasi contract to be fulfilled
a. An act of management
b. This act of management must be done by a manager, who has no consent of the
owner
c. There must be an owner of those things being managed, who has not given consent
to the management.

Effects of this management of another person’s affairs

The real effect of this quasi contractual arrangement is the creation of obligations on both
parties, the manager of another person’s affairs and the owner thereof.
A.Obligations of the manager
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There are essentially three important obligations of the manager of another person’s affairs
towards the owner, namely:
a. He or she must continue the said management until such a time the owner thereof is
able to assume / resume the management himself; that is, he cannot simply abandon
the management anyhow.
b. He must take reasonable care in the said management, that is, he must exercise due
diligence like “ bon père de famille” without committing a fault in the said
management.
c. He must give accountability to the owner after the said management, in accordance
with the provisions of article 534 CC III.
B. Obligations of the owner
The owner of the business (enterprise / affairs has the following obligations:
a. To undertake (take on) all the obligations assumed in his name by the manager, even
those towards third parties; for example, if his children were taken to a private clinic
by the manager, the owner has to pay all the medical bills that accrued
b. To repay (to refund) the manager for all incidental but necessary and useful expenses
that the manager undertook on behalf of the owner while the owner was away
during the said management (article 251).
II.3.2. Payment or restitution of an undue Debt
This is provided by articles 252 – 257 CC III.
This quasi-contract arises where one person receives payment from another person where
there is no obligation necessitating this payment; that is to say, where there was nothing
due or nothing was owed.
This payment may be in cash or even in kind or in any other form. Examples of scenarios
where this quasi-contract may arise:
a. Payment for some obligation which did not or doesn’t any longer exist (Art 252 CC
III);
b. Payment for more than is due; this means that the difference between what is paid
and what is due must be realized in favor of that who gave more;
c. Payment for a debt (by error) in place of (for) somebody who was supposed to pay
(art. 253 CC III)
Conditions for this quasi-contract to apply
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Three conditions must exist in order for there to be this quasi-contract, namely:
a. There must be a payment, that is to say provision (or exchange) of something
tangible.
b. There must not be a debt, that is to say, there must be neither a civil nor a natural
obligation (article 133 (2) CC III).
c. There must be an error of payment from the person so paying (the debtor to the
creditor of an obligation) – article 253.
In effect, where an individual receives something that is not owed, out of that quasi-
contractual relationship (obligation so created), that person receiving he is under an
obligation to return it (article 252).
The quasi-contract does not exist if there is in fact a debt and it has merely been paid before
its term.
If the thing received has already been resold, then it cannot be returned to its original
owner. In such cases the price of the sold object must be repaid (article 256 CC III).

II.3.3. Unjust enrichment

This quasi-contract doesn’t have origins during Roman times, unlike the other two already
mentioned. It was at the end of the 19th century that this concept began to have its place as
an independent source of quasi-contractual obligation.
Enrichment without cause arises where property or income of one party finds itself in the
hands of other without legitimate cause or justification, this being a detriment of that other
person.
Conditions for this quasi-contract to apply

There are five conditions that the law regards as indispensable for this quasi-contract to
apply:
- Correlative impoverishment and enrichment between respective parties
- Absence of fault on the part of the party being impoverished
- Absence of personal interest on the part of the party being impoverished
- Absence of cause
Correlative impoverishment and enrichment between the parties
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This correlative impoverishment and enrichment between the parties may not only take
monetary forms, it may take any other form such as time that can be translated into money
for example, intellectual input and time taken by a teacher to teach students.
There is thus one party that is losing out (impoverished) and another that is gaining out of
this arrangement.
It is this correlative relationship that underlies the quasi-contractual obligation on the part
the one who is being enriched, towards the party that is being impoverished.
That is to say, the enrichment should be a necessary consequence of the impoverishment.
This may be pecuniary, material, moral or even intellectual. It may also be done directly or
through an intermediary.
Absence of fault on the part of the party being impoverished
This impoverishment should not be a result of a fault of the party being impoverished. For
example, a garage owner who effects additional and un-detachable repairs to your vehicle
without the car owner’s consent.

Another example is whereby a pump attendant gives you fuel worth 5.000frw (five
thousand) when you told them only 3.000frw (three thousand) and you had no additional
2.000frw with you.
Absence of personal interest on the part of the party being impoverished
If, in the process of doing something that may profit others, the party so doing has a
personal interest, this does not create an obligation on others that are so profiting in the
process. For example:
- a person who constructs an embankment on an adjoining wall with neighbors,
- a person who builds a road to his block of flats with a view to attracting profits but is also
useful and profitable to others.
Even if the said persons lose out in the process and others gain, they cannot complain
because what was initially planned was personal gain and the risks and dangers involved
should have been foreseen.
Absence of cause
There must be absence of any known or justifiable cause. For example, if the cause of
enrichment is a donation (a gratuitous contract) or a legal disposition after death, there
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cannot be a cause of action since there was an intention to donate or to give out that legal
disposition.
So the enrichment of that nature without a legitimate or justified cause is what we call the
absence of cause that gives rise to an action in this quasi-contract of enrichment without
cause.

Unit 2: Business Law

PART 1. GENERALITIES ON BUSINESS LAW
CHAPTER I: INTRODUCTION AND DEFINITION OF KEY CONCEPTS

I.1 Introduction

The generally accepted view amongst writers is that modern BUSINESS law developed out of the
medieval law merchant (or lex mercatoria) which governed practices and disputes between
merchants and traders before it was ‘swallowed up’, ‘borrowed’, ‘absorbed’, or ‘incorporated’ by the
common law, a process which began in the seventeenth century. The culmination of this process
was the series of ‘great codifications’ that took place in the United Kingdom at the end of the
nineteenth century.

One conclusion that might be drawn from this simple historical picture is that modern business law
is, as it always has been, essentially a body of rules concerned with trading and business relations.
This explains the persistence of topics such as negotiable instruments or contracts of carriage.
However, in recent years, we have seen the emergence and influence of new International
commercial Law, driven by the International Institutions such as, the World Bank, and the
International Monetary, through the Basel committees on Banking supervision and similar bodies
like, International organizations of Securities Commission (IOSCO) to industry bodies such as the
International Chamber of Commerce (ICC), the International Accounting Standards Board (IASB). For
the purpose of this course we shall not describe or engage into the activities of these organisations.

In Rwanda as commercial practices worldwide continue to evolve, steps have been taken to update
and enact the relevant laws, to provide traders, practitioners and courts with appropriate governing
 18

laws. Such laws include Companies Act, Mortgages law and Civil, Commercial, Labor and
Administrative Procedure code. Reference shall be made to these laws and other applicable laws
during this course.
The unit will be limited primarily to the study of the rules of general commercial law, the law of
commercial companies, and some commercial contracts.
I. 2. The field of the business law

In 1997 Justice Roger Giles addressed the annual general meeting of the Commercial Law Association
in Sydney with a paper titled “Commercial Law – What is it?” Justice Giles arrived at the following
conclusion:
“So what is commercial law or business law? It’s almost anything. It goes much
beyond the regulation of the relationships between merchants and traders, and it
goes beyond those parts of the law most commonly associated with business
activities in that all major and fundamental areas of law are now commonly
associated with business activities.”
I. 3. Characteristics of the commercial law in comparison with the civil law

The civil law and the commercial law are all of the private law, in what the two disciplines govern the
relationship between the private individuals. However, the civil law dominates the commercial law
insofar as its rules are so fundamental that they govern necessarily all the judicial acts: the regime of
goods, the obligations, and the responsibility. There is a strong co-penetration between the two
disciplines. At a certain extent, the civil law was marketed itself: the collective payment of the debts
for example is inspired by the bankruptcy which belongs to the commercial law. Moreover, for Ripert
and Roblot "the commercial law is only the meeting of the exceptions brought to the rules of civil
law in the interest of the trade ". The civil law constitutes the common law and the commercial law
remains a law of exception. It is a group of all particular rules laid down in the interest of the
businesses. Certain countries like Italy and the Netherlands, the commercial law was absorbed by the
civil law, in the form of a law of the companies.
In spite of this co-penetration, the business life has been emancipated from the civil law for two
principal reasons: speed of the trade operations and the reinforcement of the credit.
I.3.1. Speed in the trade operations

In businesses, the operations, either they are of distribution of goods or of the industrial production
of goods must multiply themselves without loss of time. Time thus plays a significant role in the
business world than in the civil law.
This celerity of the operations undoubtedly involves two extreme contradictory consequences but
 19

explicated one by the other: the freedom of evidence and formalism of many operations.
1. The freedom of evidence
The freedom evidence in commercial law makes it possible to establish the content of the
transactions which were validly concluded. Indeed, in commercial matters, the proof is free, while
regulated in civil matter. (see art. 217 CCBIII). Thus, the commercial law is released from the rules of
proof which are rigid in civil law and especially from the pre-establishment of a writing.
2. Formalism of many of operations
The hostility on forms as the civil law conceives it remains a principle and the formalism is especially
standardization. However, certain engagements must be made in a special form (e.i. commercial
drafts, a cheque, a bearer bond) and certain companies must work in a rigorous mechanism to reach
a given result (ex. the framework of a limited company). On the other hand, the formality is often
simplified to the extreme: crossing of a cheque, simple signature on the back of a draft, stereotyped
contract, printed purchase order, etc.
I.3.2. Reinforcement of the credit

For the companies to start up or obtain raw materials or in acquisition of any other material, or for
the build-up of stocks or securing payment to the customers, it will need sufficient financial credit.
This most of the times leads the company into acquisition and living partially, in a state of debt, i.e. in
search of credit. However, to obtain this credit from the suppliers or the financial funders like the
bankers, it is necessary to institute protective rules of the creditors. To obtain this credit one need to
provide banks with securities to grant recovery in case of failure to repay the loan. These include
safeguard measures such as:
- Obligation for Avery commercial company to hold an accountancy which must make it possible to
review its solvency;
- Institution of the bankruptcy which organizes the seizure of all the credit balance when the trader
is in a state of suspension of payments and shock of credit;
- the business law multiplies the publicity of the acts and the statutes: marriage contract of the
trader, trade register, statutes of the commercial companies, convocation of the general assemblies,
publication of the bankruptcy judgements, publicity of the protests, etc.
- The presumption of Joint holders which makes possible to sue any of the businessmen when they
treated jointly. The civil law principle of solidarity which must be express.is thus repudiated.
- The credit with the pledge without dispossession: the creditor is protected without that the debtor
is prevented from using his active element (ex. hypothecation of business);
I.4. Principles of business law
 20

In order to accommodate commercial activities, commercial law draws on principles from a number
of different areas of law and jurisprudence: ‘the exchange of merchandise and services’ is managed,
legally, through the mechanism of contract law, but principles from tort, property, equity and trusts
and even criminal law may be regarded as part of ‘commercial law’.

Essentially, the purpose of commercial law has been regarded as the facilitation of commercial
activity. Within this broad objective a number of principles can be identified certainly and
predictability; respect for party autonomy; recognition of the customs and practices of the
mercantile community; and flexibility in order to accommodate changing practices.

Some of these principles overlap: recognition of market practices may, for instance, be seen as an
aspect of respect for party autonomy, and both may be seen as tending to promote certainty.
I.4.1 Certainty

From early times, it has been recognized that commercial people require the law to deal speedily
with their problems and to provide clear solutions, to enable costly and time-consuming litigation to
be avoided if possible. This need has been met in various ways. Commercial courts have been
established and are operational since 2009. Thus, in medieval times special courts were provided for
the resolution of commercial disputes, today the Commercial courts aim to provide a procedure
which is quick, simple and flexible.

If the law is to be capable of dealing speedily with disputes, it must, so far as possible, be clear and
certain. If the law is certain, the outcome of a dispute may be predicated and the parties may resolve
it with resort to litigation or by way of alternative dispute resolution. ‘ it is better to lose by the
application of a swift and certain rule than to win after long and uncertain delay’.

I.4.2. Party autonomy

A second feature of commercial law is its respect for party autonomy. This can clearly be seen in the
law of contract, with its central doctrine of freedom and sanctity of contract and its refusal to
question the adequacy of consideration or to intervene in contract on the basis of ‘fairness’. This
non-interventionist approach is justified on the basis that it ‘facilitates the conduct of trade’ by
promoting certainty.

According to party autonomy principle, parties have freedom to form contracts without restrictions.
The rationale is that a contract presumes that the individuals are free and equal. Therefore freedom
 21

of contract is seen as the expression of the independent decisions of separate individuals pursuing
their own interests in a "minimal state”.
I.4.3. Flexibility

Well-rooted in modern commercial law is the idea that the law should reflect the fact-patterns of
common life. The Uniform commercial Code champions this tradition by viewing the performance
practices formed among the parties throughout their interaction as a primary source for interpreting
and supplementing their explicit contracts. The generous recognition of waiver and modifications, as
well as the binding force the Code accords to course of performance, course of dealings, and trade
usages, effectively permit the unwritten commercial practices to vary and erode explicit contractual
provisions. This approach, which allows the reality law the relationships to supplement and vary the
original rigid manifestation of assent, has long been celebrated for its realist, non-formalist spirit.
I.5. Sources of business law

I.5.1 International sources

The role of international treaties is unknown in civil law. The implications of international
conventions on commercial law have been compounded by recent developments and increasing
interdependence in international commercial activities. Some might even argue that the result of
these developments might have had same or uniform (unified) international law.
EX:
- The Protocol relating to the Madrid Agreement relating to the International Registration of Trade
Marks adopted in Madrid, Spain on 27/06/1989
- The UN Convention on contracts for the International Sale of Goods adopted in Vienna in 1980
I.5.2. Domestic sources

Currently, there is no commercial law code in Rwanda. However, some disparate laws do exist:

1. Law n° 11/2009 of 14/05/2009 on security interest in movable property.

2. Ministerial order n° 01/MINICOM of 08/05/2009 determining small private limited company;
3. Ministerial order n° 02/09/MINICOM of 08/05/2009 relating to business of low income;
4. Ministerial order n° 03/09MINICOM of 08/05/2009 determining fees for registration of
companies’ business activities.
5. Law n° 10 2009 of 14/05/2009 on mortgages;
6. Law n° 12/2009 of 26/05/2009 relating to commercial recovery and settling of issues arising
from insolvency;
7. Law n° 36/2012 of 21/09/2012 relating to competition and consumer protection
 22

8. Law n° 005/2008 of 14/02/2008 on arbitration and conciliation in commercial matters;

9. Law n° 35/91 on the organisation of internal trade as modified and supplied to date.
10. Law n°07/2009 of 27th April 2009 on commercial companies, and others

I.5.3. Civil (private) laws

As said above, commercial law is not self-sufficient. It does not contain a complete regulation of all
aspects of commercial and industrial activities. The civil law must apply to commercial matters as
long as an express provision does not exclude it. If it happens that there is a conflict between the civil
law and the commercial law the latter is applied (Specialia generaribus derogant).

I.5.4. Custom and practices or Lex mercatoria

The lex mercatoria or the law of merchants is created spontaneously by the participants in
international trade and applied by arbitrators to settle international disputes. The rules of lex
mercatoria are founded on usages developed in international trade, on standard clauses, on uniform
laws, on general principles of law and on the contract negotiated by parties. Trade and usages are
undeniably important in international trade. Each branch of industry has developed its own practices
and usages which are adapted to the needs of the business sector: thus there are specific usages in
the grain trade, the oil industry, the banking sector, etc. Commercial usages are often included in
standard contract or standard clauses. They are usually drawn up by the commercial organization of
a business sector and are used by the members of that sector.

Customs generated by trade activities may provide the legal basis for matters not covered by the
legislation. For example, certain usages within a particular type of trade can become part of the
expectations of those engaged in trading activities. The same might apply on some simple activities
of buying and selling.

The professional usages tacitly complete the conventions between traders (merchants), but anyone
who invokes them must establish them in case of possible contestations.

Here are some examples of principles of lex mercatoria:

a) The contract shall be enforced according to its term (pacta sunt servanda). i n its most
common sense, the principle refers to private contracts, stressing that
contained clauses are law between the parties, and implies that non-fulfilment of respective
 23

obligations is a breach of the pact. However, good faith may require that a change in
circumstances is taken into account to alter the contract terms ( rebus sic stantibus);
b) The performance, as well as possible re-negotiation of the contract because of changed
circumstances, shall be carried out in good faith;
c) The party’s conduct may, under certain conditions, be assumed to be an implied change of
contract; if not opposed by the other party;
d) The interpretation of contract must be pragmatic (the doctrine of the so-called effet utile;
e) If the legal terminology used by the parties does not reflect their intentions, the terminology
must be adapted to the parties’ intentions;
f) Use of goods by the buyer creates a presumption of acceptance of the goods;
g) The onus of proof is on the plaintiff;
h) FORCE MAJEUR may, under certain conditions, release the parties from their contractual
obligations;
i) The exceptio non adimpleti contractus is generally applicable.

Article 201 of the 2003 Rwandan Constitution also recognises the applicability of customary law.
Article 201(3) states that “unwritten customary law remains applicable as long as it has not been
replaced by written laws, is not inconsistent with the Constitution, laws and regulations, and does
not violate human rights, prejudice public security and good morals.

CHAPTER II. TRADERS, COMMERCIAL ACTIVITIES AND COMMERCIAL INTERMEDIARIES

II.1. Traders
II.1.1 Definition and general conditions of trader’s status

Under commercial law traders are defined as "those who make profession of commercial acts
qualified as such by the law". This definition was also taken again by article 1 par.2 of the law n°
15/2001 of 28/01/2001 amending and supplementing the law n° 35/91 of 5/8/1991 on the
organization of the domestic trade. Indeed, according to this subparagraph, "has the quality of
trader, any person or entity which make profession of the commercial acts qualified as such by the
law".

To become "trader", any person or entity must achieve commercial acts. But the commercial act
itself is not defined by the law. It is generally given as the act by which a person involves her/himself
in the circulation of the goods and the services while seeking to benefit from her/his intervention,
 24

exception made to the services in intellectual matter (for example those of the liberal professions)
which are not regarded as commercial acts.

The Ministerial Order No 02/09/minicom of 08/05/2009 relating to business of low income defines a
business activity as any business activity carried out by any individual regardless of sex and registered
as provided for by this Order. It shall include purchase and sale, service delivery or any other
professional activity done on a regular basis in order to gain profit.

This Ministerial Order does not however ascribe a clear meaning of a business activity. For that
reason one has to rely on the list of commercial activities as provided by the above mentionned law
on trader and Proof of Commercial Agreements which takes trade as a professional undertaking i.e. a
serious occupation, regular, consistent and durable so that it can generate a profit.

Thus, an isolated activity of sale or resale by an individual who does not undertake it as a habitual
occupation does not make this person a trader, legally speaking

However, it is not necessary that the profession must be a principal occupation of the person or must
be obvious: anyone, who beside his principal civil profession, undertakes commercial activities
secretly (without prior registration), becomes a trader.

1. The fulfilment of commercial activities in one’s name and for his account

Even if the law does not provide it, it is obvious that to be considered as a trader, an individual must
undertake commercial activities in his name and for his account. Thus, an employee of a trader is not
a trader because he acts in the name of another person: the trader.

The same applies to a branch manager of a consumer cooperative, managers and directors of
organisations who act for the account of these organisations as representatives. The exclusion also
extends to those who undertake commercial activities for the account of the State and Public
Organisation (e.g. an official of the Treasury Department who carries out bank operations).

A difficulty arises when more than one related persons (note that they are not employees)
collaborate into commercial activities without a prior employment contract or a deed of partnership.
Particularly, with regards to the spouse who is a trader, it is admitted that a woman married to a
trader and who only retails commercial merchandises is not a trader. Here we distinguish two cases:
 25

If the husband is effectively a trader and his wife’s role is that of an assistant (conjoint aidant), only
the husband is the trader, responsible for the debts of his trade and in case of failure to make
payments he is solely declared bankrupt (e.g. the wife is a cashier).

If the couple runs the business together they are both equally responsible and are considered as
traders (this is the case when the wife has signed certain commercial documents).

Brokers and commissioners who do not act for their account are considered as traders because the
law considers their activities as commercial.

2. Legal capacity to carry out commercial activities

Although this requirement is not expressly stipulated by the law, it is nevertheless a logical outcome
of the very nature of trading activity. In order for an individual to be fully able to assume the duties
and liabilities of commercial activities, this individual must have the legal capacity to do so.

The Ministerial Order on business of low income fixes the majority age for business activities at 16
years.

II.1.2. Bans (prohibitions), incompatibilities and incapacities

There are certain categories of persons who are barred from being regarded as traders. These
include both persons who are barred by their very nature, such as minors, and those who have been
declared incapable of managing their own affairs.

However, there are also those who are barred because of certain measures taken against them;
either because they exercise certain activities (e.g. public offices) which preclude them from acting as
traders, as because they have been sentenced by the courts for certain types of misdemeanour.

1. Prohibitions (Bans) and Incompatibilities

Specific laws prohibit some individuals from undertaking commercial activities. These individuals
include lawyers, notaries, and members of the judiciary, civil servants, officers and non-
commissioned officers of the Rwandan National Army.
 26

The idea behind this prohibition is that undertaking trade activities is incompatible with the nature of
their jobs, i.e. in order to preserve their neutrality and dignity of their functions and also to prevent
corruption.

However, the law establishes a list of activities which are compatible with the duties of the civil
servants. They can participate in agriculture, cooperatives, farms… They also can participate in
companies provided by law but they cannot be their managers, directors... They are also allowed to
build houses for rent.

In addition, some individuals sentenced by criminal courts are prohibited from the exercise of
commercial activities.
2. Incapacities

The general rule is that persons who are considered as lacking legal capacity under civil law, also lack
capacity under commercial law. Persons who lack the legal capacity to carry out commercial
activities are insane persons, spendthrifts, minors non-emancipated, etc.

The decree of 02/08/1913 enumerates conditions under which a minor might be allowed to exercise
commercial activities:

-The minor must be an emancipated minor, i.e. a minor who has been relieved from paternal or legal
representation:
-The minor must have obtained her/his paternal or legal guardian’s authorisation to engage into
commercial activities:
Such an authorisation is ascertained by a declaration made before a judge or a public notary.

The withdrawal of that authorisation must be rendered by a judgement. A register of authorisations,

judgements on authorisations and withdrawals of authorisations must be kept in the Clerk’s office of
the Intermediate Court. The register may be made accessible at no cost to any person who requests
it.

An emancipated minor is not automatically a trader. He has to obtain the authorisation to engage
into commercial activities and his capacity extends only to the activities he is authorised to engage
into. His capacity for unauthorised activities is appreciated in accordance with civil law rules
 27

governing ordinary emancipated minors. This rule is however contradicted by a recent company law
which decreases the majority age at 16 (art. 427).

The Rwandan law does not provide for continuation of parents’ trade. Under Belgian law (art.8 of
Belgian Commercial Code), a minor whose parents are dead is allowed to continue his parents’
commercial activities in order to avoid a distressful liquidation of these activities.

However, this minor cannot manage these activities in his own. He must be under the supervision of
a guardian or a special administrator. We should note that this applies only to the continuation of
parents’ trade and not to an inheritance from another person or to a new business started by a
guardian for his ward (pupille).

“L’interdit judiciaire” has no judicial capacity and he cannot engage into commercial activities. The
guardian may continue the business started before the ban (prohibition).

With regards to the person “sous conseil judiciare” (art. the exercise (undertaking) of commercial
activities is practically impossible because the person “sous conseil judicaire” must be assisted by the
“Conseil”.
II.1.3. Termination of the Trader’s status
1. Cessation of commercial activities

Once a trader has ceased to engage into commercial activities, on habitual and professional basis, he
is no longer a trader within the meaning of the law. The same applies when he disposes of his
business (i.e. once he liquidates, loses or sells his business).
2. Bankruptcy

Once a trader is deemed bankrupt, he is relieved of the management of his commercial activities and
an administrator is appointed. The latter liquidates the trader’s business. When declared bankrupt,
the trader loses his business and assets, but he does not necessary loose his status as a trader. Once
his assets are liquidated and divided among creditors, he may engage into trade, provided that he
does not benefit in any form or shape from his liquidated business (e. g. the use of materials, assets,
contacts, clients etc…)
3. Death
 28

The trader’s status is not, in itself, inherited. If inheritors continue the business, they are traders in
their own name. Independent from this continuation, however, the deceased’s commercial
activities, which are continued, by any of the inheritors does not lose their quality as commercial
activities within the meaning of the law. In addition, the widowed that liquidates the business is not
considered as a trader.
4. Incapacity

A trader loses his status the moment he becomes incapacitated.

II.2. Commercial activities

The law did not establish a general standard of the commercial act, but gives some restrictive and
heteroclite enumeration. Vis-a-vis this enumeration, it is advisable to give the criterion of the
commercial act.
II.2.1. The list of the commercial acts

The law enumerates the commercial acts, was written at the beginning of the 20 th century according
to the economic reality of the time. It is obvious that this list is old, but unfortunately it was neither
reformed nor modernized, this enumeration being restrictive. This has a serious consequence that
any person who achieves an act not taken again by this text cannot be regarded as a trader whereas
the act fulfils the criteria of commercial act.

Essentially, the law considers as commercial acts:

- Any purchase of food products and goods to resell either in kind, or after having worked on them
and implemented, or to even simply rent the use of it; any sale or hiring which is the continuation of
such a purchase;
-Any hiring of pieces of furniture to sub-lease, and very under hiring which is the continuation;
- Any company of manufacture or factory, of public works or private, of commission and of transport;
- Any company of supply, agency, offices of businesses, establishment of sale to the auction, public
spectacles and proprietary insurances;
- Any operation of bank, changes or broking;
- Bill of exchanges, mandates, tickets or other effects with order or to the carrier;
- All obligations of the traders, even relating to a building, unless it is not proven that they have a
foreign cause with the trade;
- Any building firm and all purchases, sales and voluntary resales of the buildings for the internal and
 29

external navigation;
- All maritime shippings;
- Any purchase or resale of tackle, tackle and fuelling;
- Any freighting or chartering, gross loan or borrowing;
- All insurances and other contracts concerning the sea trade;
- All agreements and conventions for wages and rents of crew;
- All engagements of sailors, for the service of buildings of trade.

II. 2. 2. Classification of commercial activities

The diversity of the commercial acts presented by the law can be juridical classified in four
categories: commercial acts by nature, commercial act by the form, commercial acts by repetition,
commercial act by relation and mixed commercial acts.

II.2.2.1. Commercial acts by nature

This category includes operations which are commercial, notwithstanding their character isolated or
the quality of non-trader of their author.

The acts which, even isolated, are of the commercial nature can in their turn being divided between
commercial acts by their cause and commercial acts by their object.
1. Commercial acts by their cause

These acts will be commercial because of the objective which inspires them:
- Purchase of movable objects to sell them and rent them, or the hiring to sub-lease.
The purchase must be inspired by a speculative commercial intention: to resell or rent; the same of
hiring: to rent to sub-lease.
The resale or sub-renting can be accompanied by a transformation or work. Generally, that who buys
to resell or to rent will be trader and the nature of the commercial act will not be a doubt.
- Purchase of a business to exploit it;
-Additional acts to a commercial deal
Any act which is accomplished in order to supplement a commercial deal acquires a commercial
character.

2. Commercial acts by their object

The commercial acts by their object are those which are normally achieved by a trader. Any person
 30

who would achieve them carries out a commercial act, with the consequences which stick to it.
- The operation of bank or exchange
The operation of bank consists in receiving in a usual way of the funds of the public and grants
appropriations for its personal use (article 1, of the law 007/2008 on the organization of banking). Let
us stress that under the same article the following are not regarded as banks: institutions of micro-
finances; co-operative companies of saving and credit; Organizations of collection of the saving.
- The company of commission and operation of broking

The commission agent concludes the contract on his behalf but for the account of a principal
realising remuneration.

Broking is the act of a person which, with remuneration, is used as intermediary between two people
to enable them to conclude a legal operation (broking of insurance, furniture, matrimonial). The
broker does not intervene like representative of one or other party in the conclusion of the contract.
- Operations relating to navigation
All the operations relating to navigation are considered as commercial, whether they are of sea
transport or the inland navigation.
II.2.2.2. Commercial acts by repetition

This category includes operations which become commercial only by their repetition.

- The company of manufacture or factory;

- Companies of public or private works;

- Transport companies;

- Companies of supply;

- Agencies and offices of businesses;

- Establishments of sale to the auction;

- Establishment of public spectacles;

- Insurances with premium.

 31

II.2.2.3. Commercial acts by the form

- Bill of exchanges, mandates, promissory notes or other effects with order or the carrier

- Companies with lucrative goal act.

II.2.2.4. Commercial acts by relations

The law regards as commercial acts "all obligations of a trader, of movable or immovable object,
unless it is proven that they have a foreign cause to the trade (art.2 A, in fine).
Contrary to the preceding categories, the commercial act is defined here like the act of the trader: a
presumption of negotiability is established with regard to all engagements of a trader. This
presumption is general and covers:
- Debts contracted by the trader for the exploitation of his trade, in particular his loans;
- Obligations resulting from illicit acts, for example the civil liability resulting from an accident or
obligation to repair the consequences of an illicit act of competition;
- Obligation to pay the price of a building;
- Even obligation resulting from or the management recovery of overpayments of businesses.
II.2.2.5. Mixed commercial acts

The mixed commercial acts are those which are concluded between two people whom one is a
trader and the other is not. The mixed act is commercial only on the side of the trader. The
obligation of the private individual remains civil. Thus in the contracts concluded between a trader
and a consumer, the doctrines and case-law consider the contract commercial for the trader and civil
for the consumer. The purchase of a car in a garage by a doctor is a mixed commercial act.

The list of the commercial acts is limited in a concrete way to a certain number of activities.
Consequently the question arises of knowing if this list is restrictive. It is the question of the criterion
of the commercial act.
II. 3. COMMERCIAL INTERMEDIARIES

Companies that bring their products to the market can choose to do so through a large variety of
intermediaries. They can choose between independent agents, brokers, commission agents, and
various innominated intermediaries. Although contracts with commercial intermediaries present
important similarities, the current regulatory framework is scattered and incoherent. The section
deals briefly with commission agents, brokers, commercial agent.
 32

III.3.1 Broker

A broker is a party that mediates between a buyer and a seller. A broker who also acts as a seller or
as a buyer becomes a principal party to the deal. Distinguish agent: one who acts on behalf of a
principal.
A broker is also defined as an intermediary who acts neither in his own name nor for his own
account, but who arranges contact between the parties in order to facilitate or conclude transactions
between those persons.
If the broker comes out of his traditional function and contracts in his name but on account of a
principal, he becomes a commission agent and assumes all obligations that go with that status.
The broker is remunerated by whichever part that has instructed him and receives a percentage of
the value of the transaction.

III.2. Commission agents

Commission agent is a person who acts in his name (personal or firm name) but on behalf of a
principal without disclosing the name of the principal to the contracting party. In return he is paid a
commission.

The commission agent may be an individual or legal person. The intervention of the commission
agent gives birth to two contracts. Commission contract which is formed between the principal and
the commission agent and the commercial transaction which is concluded between the commission
agent and a third party.

The commission agent accepts or sells goods for the account of his principal, but in his own name. He
is independent of his principal, has a claim for his commission and, except in France, has the right
when dealing with certain goods to conduct the transaction as he sees fit.

CHAPTER V : COMMERCIAL DISPUTES SETTLEMENT

It is more than logic that when people do business some claims or disputes may arise. The purpose of
this chapter is to talk briefly about the ways of resolving those disputes. We shall talk about litigation
and alternative dispute resolution: Negotiation, Conciliation, mediation and arbitration.
V.1. Litigation
 33

The term litigation encompasses the act of carrying on a legal proceeding. A legal proceeding
connotes the resolution by a judicial tribunal of an issue between two parties. For the purpose of this
course we shall not talk in details about litigation because the topic has been covered in other
course. However, we shall compare litigation and arbitration.
V.2. Negotiation

All forms of negotiation are forms of disputes resolution. Where a dispute arises, the first step will
often be an attempt to negotiate a settlement of the dispute. If negotiation is successful, the dispute
will be settled by agreement. Such negotiation may also take place within the context of court
litigation in that negotiation prior to or during litigation may lead to a settlement.

In the specific context of Alternative dispute resolution, negotiation is defined a private, voluntary
and consensual process whereby parties attempt to resolve their differences personally by
agreement. one of the benefits of this process is that both the discussion and the outcome can
remain confidential, unless negotiations are in the public interest (for example labor or trade
negotiations).

In negotiation, the parties attempt to reach an acceptable resolution of their dispute without outside
intervention. This is the distinction between negotiation and mediation or arbitration in both the
latter instances, a third party is involved.

In negotiation, parties should adopt a humble attitude, more listen than talking and try to reach a
decision together. If parties really wish to reach an acceptable resolution, they shouldn`t stand their
grounds but listen to the other party and find a resolution.

Look at this example of two donkeys. They are chained one to another. They cannot reach the herbs.
Each of them tries to pull and push to reach them, but in vain. At the end of the day, they figure out
that the best way is to sit and reach and resolution. You can see that they make it.
 34

It is worth noting that sometimes it is no easy to perform the task of negotiator. He/ she is
sometimes in what is known as negotiator`s dilemma. Here are some examples:

1. THE PRISONER’S DILEMMA

Two suspects are arrested by the police. The police have insufficient evidence for a
conviction, and, having separated both prisoners, visit each of them to offer the same
deal. If one testifies (defects) for the prosecution against the other and the other remains
silent, the betrayer goes free and the silent accomplice receives the full 10-year
sentence. If both remain silent, both prisoners are sentenced to only six months in jail for
a minor charge. If each betrays the other, each receives a five-year sentence. Each
prisoner must choose to betray the other or to remain silent. Each one is assured that
the other would not know about the betrayal before the end of the investigation. How
should the prisoners act?

2. THE CROCODILE RIVER STORY

Once upon a time there was a woman, Mukasine, who was in love with a man, Kalisa. They lived on
opposite shores of a wide river which was filled with man-and- woman-eating crocodiles. Mukasine
wanted to cross the river to be with Kalisa, but the bridge had been washed away.
So Mukasine went to see Sebyatsi, a riverboat captain, to take her across. He said he would be glad
to if she would sleep with him before the trip. Mukasine said ‘no’ and went to a friend named John to
tell him about the problem. John said he did not want to get involved in the situation. Mukasine felt
 35

she had no choice but to accept Sebyatsi’s terms. Sebyatsi fulfilled his promise to Mukasine and
delivered her into the arms of Kalisa.
When Mukasine told Kalisa what she had done in order to cross the river, Kalisa was disgusted and
threw her out. Mukasine felt hurt and rejected and told Elias her sad story. Elias, feeling sorry for
Mukasine, found Kalisa and beat him up. Mukasine was very pleased to see Kalisa get what he
deserved. As the sun sets, we hear Mukasine laughing at Kalisa.

V.3 Mediation

Mediation is the process by which parties in conflict voluntarily request an acceptable third party to
assist them in reaching agreement on those issues that divide them. Mediation is an extension of the
structured negotiation process involving the services of a third party. It has thus been said that
mediation is nothing more than negotiation by other means. Mediation usually invoked when
negotiations have failed, though it is sometimes used earlier in the conflict-solving process.
Mediation is often and successfully employed to resolve conflict in personal and family matters,
industrial disputes, national and international confrontations, and in commercial and environmental
disputes.

Although the role of neutral party in the case of mediation is much more defined and crucial than is
the case in negotiation, mediation is nevertheless typified by the fact that the parties at no stage
surrender the outcome of the conflict to their chosen mediator.
The mediator`s task is to assist the parties to the dispute to define acceptable options for reaching a
settlement, the terms of which they themselves will determine. The presence of a mediator is
therefore not for only indispensable, but it also distinguishes mediation from negotiation, where the
process often takes place without the intervention or presence of a third party.

Unless the parties to the mediation process reach a firm agreement, mediation, like negotiation, is
rather ineffectual method of dispute settlement due to its non-binding nature.
V.4 Conciliation

Conciliation shows similarities to mediation. It is structured negotiation process involving the services
of an impartial third party. The role of the conciliator differs from that of the mediator in that the
conciliator will, in addition to playing the role of a mediator, also make a formal recommendation to
the parties for the settlement of their dispute or conflict.
 36

Conciliation is practical method of dispute settlement in international trade, provided that

conciliations and the nature and state of the relationship between the parties concerned are
conducive to it. Like negotiation and mediation, conciliation is a rather ineffectual method of conflict
or dispute settlement due to its non-binding nature. Parties who desire an extrajudicial settlement of
their international commercial disputes, are more likely to agree on arbitration.

Nevertheless, conciliation proceedings are traditionally part and panel of the resolution of legal
disputes in some jurisdictions, particularly, in the Far East. In certain instances, for example, a
submission to conciliation proceedings may be mandatory and a prerequisite before any resort will
be permitted not only to litigation but even to arbitration.
V.5 Arbitration

V.5.1 Introduction

In Rwanda, new law on commercial arbitration and conciliation was established in 2008 as Law n°
005/2008 of 14/02/2008 on arbitration and conciliation in commercial matters.

Article 3 (2) of Rwandan law on arbitration defines arbitration as „a procedure applied by parties to
the disputes requesting an arbitrator or a jury of arbitrators to settle a legal, contractual or another
related issue‟.

Arbitration refers to a process in terms of which the parties to a dispute voluntarily and jointly ask a
third party, the arbitrator, to hear both sides of their dispute and make an award that they
undertake in advance will be final and binding. The fact that the arbitrator settles the dispute by
making a legally binding award distinguishes arbitration from mediation and negotiation. For this
reason, arbitration is more similar to litigation, as both are command process where a decision is
imposed on the parties, in contrast to negotiation, which are consensual in nature. But, in contrast to
litigation, the arbitrator`s award arises from the consent of parties to accept the award, not from the
power of the court imposed n order.
V.5.2 Significant features of arbitration

Four significant features of commercial arbitration are singled out for now, although they will be the
subject of a brief comment later. These features are:

 The agreement to arbitrate;

 37

 The choice of arbitrators;

 The decision of the arbitral tribunal;
 The enforcement of the award.

V.5.2.1 The agreement to arbitrate

An agreement by parties to submit to arbitration any dispute or difference between them is the
starting point of the process in both national and international arbitration. If there is to be a valid
arbitration, there must first be a valid agreement to arbitrate. Arbitration is a contractual process in
fact that it is based on an agreement between the parties, by opposition to some cases where
arbitration is imposed in statute, such as provided for in Switzerland by article 89 of the Statute on
health care insurance for disputes between doctors and health insurers, or as provided for France by
Article 761-5 of the labour law code for certain disputes in the field of journalism.
The Rwandan law on arbitration defines the arbitration agreement. The long Article 9 of the above-
mentioned law provides:
Arbitration agreement is an agreement by both parties to submit to arbitration all or certain disputes
which arisen or which may arise between them in respect of a defined legal relationship, whether
contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract
or in the form of a separate agreement. The arbitration agreement shall be in writing. An arbitration
agreement is in writing if its content is recorded in any form, whether or not the arbitration
agreement or contract has been concluded orally, in a written form basing on the conduct of the
parties themselves, or based on other means. The requirement that an arbitration agreement be in
writing is met by an electronic communication if the information contained therein is accessible so
as to be used for subsequent reference; Electronic communication refers to any communication that
parties make by means of data message; Data message refers to any information written, sent,
received or stored by electronic, magnetic, optical and other means, including, but not limited to,
electronic data interchange (EDI), electronic mail, telegraph, telex or telefax. Furthermore, an
arbitration agreement is in writing if it is contained in an exchange of statements of claim and
defence in which the existence of an agreement is alleged by one party and not denied by the other.
The reference in a contract to any document containing an arbitration clause constitutes an
arbitration agreement in writing, provided that the reference is such as to make that clause part of
the contract.

V.5.2.2 The choice of arbitrators

 38

One of the features of that distinguishes arbitration from litigation is the fact that the parties to an
arbitration are free to choose their own tribunal. Sometimes, it is true; this freedom is unreal,
because the choice may be delegated to a third party such as an arbitral institution. However, where
the freedom exists, each party should make sensible use of it. A skilled and experienced arbitrator is
one of the key elements of a fair and effective arbitration.
V.5.2.3 The decision of the arbitral tribunal

It is not uncommon for a settlement to be reached between the parties in the course of arbitral
proceedings. However, if the parties cannot resolve their dispute, the task of arbitral tribunal is to
resolve the dispute for them by making a decision, in the form of a written award.

An arbitral tribunal does not have the powers or prerogatives of a court of law, but it has a similar
function to that of the court in this respect, namely that it is entrusted by the parties with the right
and the obligation to reach a decision which will be binding upon them.

The power to make binding decisions is of fundamental importance. It distinguishes arbitration as a

method of resolving disputes from other procedures, such as mediation and conciliation which aim
to arrive at a negotiated settlement. The procedure that must be followed in order to arrive at
binding decision by way of arbitration may be described as judicial. An arbitral tribunal is bound to
act fairly and impartially as between the parties, giving each party a reasonable opportunity of
putting his case and dealing with that of his opponent.
V.5.2.4 The enforcement of the award

Once an arbitral tribunal has made its award, it has fulfilled its function and its existence comes to an
end. The tribunal`s award, however, gives rise to important and lasting legal consequences. Although
it is the result of a private arrangement and is made by a private arbitral tribunal, the award
constitutes a binding decision on the dispute between the parties. If it is not carried out voluntarily,
the award may be enforced by legal proceedings both locally (that is to say, in the place in which it
was made) and internationally.
The registration or deposit of award is a sine qua non requirement for an award to be recognized an
enforced in Rwanda. However, no fee is paid for that registration or deposit for recognition of
arbitral awards sought in Rwanda.
According to article 395 of the law establishing Commercial, civil, social and administrative procedure
code, the party seeking recognition shall deposit the duly authenticated original award or duly
certified copy thereof; and the original agreement or duly certified copy thereof award at the
 39

president of the higher instance court`s office and request the executory stamp on the deposited
award. Article 396 of the same law, states that the President has 8 days to make a decision
concerning that recognition.

In 2008 Rwanda ratified the New York convention on Recognition end enforcement of foreign arbitral
award and became the 143rd State party to the convention.

The New York convention provides for a simpler and effective method of enforcement of obtaining
recognition and enforcement of foreign award. It is mainly due to the provisions of the New York
convention that arbitration has become a very attractive alternative to traditional litigation. It is one
of the widest accepted international conventions. It has significantly simplified the enforcement of
foreign awards and harmonized the national rules for the enforcement of foreign awards.
V.5.3 Matters excluded from arbitration

The subject matter of a dispute must be arbitrable in order for legitimate arbitration to take place.
According to article 47 para 5 of Rwandan law on arbitration provides that a party can appeal against
an award if:
The award deals with a dispute not contemplated by or not falling within the terms of the submission
to arbitration, or contains decisions on matter beyond the scope of the submission to arbitration,
provided that, if the decisions on matters submitted to arbitration can be separated from those not
submitted, only that part of the award which contains decisions on matters not submitted to
arbitration may be set aside.
Arbitration is not permissible in following matters:
 Matrimonial causes;
 Matters relating to status;
 Criminal cases.
V.5.4 Difference between arbitration and litigation

There are a number of important differences between arbitration and litigation, namely
Cost and Expeditiousness; Confidentiality; Flexibility; Impartiality.
V.5.4.1 Cost and Expeditiousness

It is a common, albeit not always true assumption, that arbitration is cheaper and less time
consuming than litigation. Can arbitration be faster and less expensive? The answer to this question
is ‘most certainly.’ However, this is not always the case. Arbitration just like any other adversarial
 40

process may be expensive and time consuming especially if one of the parties is willing and able to
spend considerable resources to defend its position and can exploit dilatory tactics to his or her
benefit. In some aspects, the very characteristics that make arbitration more appealing than litigation
are the same aspects that frame its disadvantages. For instance, the fact that it is flexible and
dependant on the mutual consent of both parties may create time delays and incidental costs.

Although litigation has been described as ‘a machine in which you enter as a pig and come out as a
sausage’. one would not be far from right by defining some international arbitration procedures in
the same way. Moreover, it is not uncommon for lawyers to take control of the proceedings in
complex international commercial arbitrations. This may come about as a result of the arbitrators’
effort to instill trust in the arbitration process. Arbitrators give both parties the opportunity to fully
present their case. Unlike in litigation where a case could summarily be dismissed, arbitration does
not have the remedies found in judicial systems that are created to limit the development of
frivolous cases. Consequently, there are no measures such as motions to dismiss or motions for
summary judgment. The non existence of such measures is an advantage for the claimant but a
rather costly disadvantage for a defendant confronted with an unwarranted claim.
Furthermore, another factor that could lead to the high cost of arbitration is the number of
extensions granted by arbitrators. Arbitrators are often very generous with the amount of time they
grant parties to submit various pleadings. While this may be in line with making sure that both
parties are treated fairly or that due process is adhered to, the result is that it amounts to significant
delays in conducting the arbitration.

Additionally, there is usually a great amount of difficulty in arranging a timetable that will
accommodate the schedule of the members of the arbitral tribunal, the legal representatives or
witnesses, if the situation warrants it.
Moreover the panel of arbitrators for complex international commercial contracts is usually three;
each of whom has to be well paid hence increasing the cost of arbitrations. This cannot be compared
to the minimal court fees one encounters in litigation.

Although a party who has the intention to drag out the arbitration, may have a great chance of doing
so particularly at the commencement of the proceeding, the cost of arbitration is often a great
advantage if parties co-operate and keep expenses to a minimum.
V.5.4.2 Confidentiality
 41

Many people view the private nature of arbitration as a main advantage. Due to the fact that court
proceedings are open to the public; many business people prefer arbitration to litigation. Unless
otherwise agreed, awards in arbitral proceedings are confidential and the proceedings are closed to
the public. This is considered important especially to parties who wish to protect trade secrets.
Moreover, in the interest of protecting present or future commercial transactions, many business
people deem any publicity of an ongoing dispute as detrimental to their reputation.
V.5.4.3 Flexibility

The arbitration process is hailed for its inherent procedural flexibility. Unlike court proceedings which
are rigid, arbitral proceedings offer greater flexibility in international commercial transactions. Parties
get to choose their own arbitrators, in addition to having the independence to customize the
arbitration proceedings to suit their wishes. Although parties may choose an already established
arbitral institution with its own set of rules of procedure, the parties have a choice to decide on
whether or not they want a totally different procedure that better serves their needs. If both parties
cooperate and decide that they both want a speedy arbitration, the flexibility of arbitration can be
used to their advantage to achieve that goal. Moreover, parties may even choose to have ‘fast track’
arbitration – an option that is offered by institutions such as the International Chamber of Commerce
and the London Court of International Arbitration.

Another reason for the preference of arbitration over litigation by business parties is that many legal
problems may arise due to the possibility of several legal systems clashing hence complicating
matters even more. It may be hard for the parties to find the most ideal place to file their suit. This
may lead to a party embarking on a venture in search of a jurisdiction that may be more sympathetic
to its interests. ‘Forum- shopping’ as this venture is often called, may be based on the search for a
jurisdiction that is likely to be biased in favour of the party choosing that jurisdiction (for instance the
anticipation of large amounts in damage awards).

Should the national courts of different countries claim to have jurisdiction over the same dispute,
parallel litigation in more than one court may be a consequence, which would not only affect the
parties heavily in costs but could potentially force them to defend themselves in multiple courts
concurrently; not to mention the ordeal of having to cope with ‘competing anti-suit injunctions.’ This
was the case in Laker Airways Ltd V. Sabena Belgium World Airlines. Furthermore, if the problem of
conflict of jurisdiction is not resolved, the various courts presiding over the dispute may render
conflicting judgments on the same matter
 42

V. 5.4.4 Impartiality

One of the main reasons parties opt for arbitration over litigation is the fear the national courts will
be biased in favour of their own citizen or the advantage of the home litigant in issues such as
knowing the system, procedural rules, etc. Therefore, proceeding on the assumption that the arbitral
tribunal will be fair and impartial and will not take the nationality of the parties into consideration,
parties choose arbitration over litigation.

If any of the parties reasonably suspects that an arbitrator lacks the necessary degree of objectivity
or that the arbitrator will not be fair and impartial in performing his duties, then that party can object
on those grounds. Some have posited this as a disadvantage of arbitration in that a party can use this
as a dilatory tactic by ‘raising unwarranted objections’ or attempt to disturb what could otherwise be
a smooth arbitration proceeding by filing an application midway through the proceedings. However
this may not be something to worry about depending on whether the parties’ arbitration is under the
auspices of an institution with rules safeguarding against such conduct. Institutions such as the
International Commercial Court (ICC) have rules where parties have to follow certain procedures in
making such objections (which have to be well founded). Moreover, those objections have to be
made in within a specific period if the party’s application is to be considered on the specified
grounds.
II.3.The commercial sale and sale of goods

II.3.1. Commercial sale in general

1. General considerations

After a short introduction, the present section deals with the definition, the formation of the sale
contract and the international commercial sales.
1. 1. Introduction

The rules of the Civil Code Book III (art. 263 and following) are applicable to the commercial sale
when they are not derogated by special texts or the practice. In the context of the Civil Code, the sale
arises as a very simple operation within which two people meet, one called (seller) wishing to sell at a
certain price a determined object, the other (purchaser or buyer ) wishing to buy at this price the
aforementioned object, which the seller is owner and therefore is already under his/her possession.
As soon as there is agreement on the thing and its price, the sale is perfect and the purchaser
 43

becomes automatically owner of the object and the transfer of ownership implies also the one of
4
risks (Res perit domino ). As it is stipulated in art. 270 CCB III, the bilateral promise of sale is
equivalent to the sale.

However, three situations should arise as follows:

- the sale by an individual (meaning a non trader) with another individual (application of the
common Law);
- the sale by an individual with a trader (it is a mixed operation already far away from the common
law although this individual remains protected by the common law especially for the formation of
the contract, while the fate of the trader is governed by the rules of commercial law;
- the sale by a trader with another trader (commercial sale in a strict sense): the commercial law
derogates on several points from the common law which the civil law constitutes.
1.1. 2. Definition

The commercial sales are not defined by the law, but they can be understood as sales and purchases
which the commercial enterprises conclude within their normal exercise of their activities. They
generally relate to the manufactured food products, raw materials, products, the machines,
apparatuses or other things to be made on orders. The sale of the immoveable things is governed by
the common law and escapes from the rules of the commercial law.
Let us remind that the sales are commercial in a strict sense, when the parties are traders, while the
sales with the consumers are mixed acts, which are not completely subject to the rules of the
commercial law. For example in Belgian law, the law of July 14, 1991 on the practices of the trade
and the information and the consumer protection states, as in chapter VI , many provisions cost full
to the sellers "salesmen" concept broader than that of trader) and for the benefit of "consumers".
This law draws up a list of prohibited abusive clauses, such as the cancellation or the reduction of the
legal guarantee of the hidden defects. 5
1.1. 3. Formation of the contract

Under art. 264 CCB III, the "sale is perfect between the parties, and the property is acquired
automatically by the purchaser with regard to the seller, as soon as there is agreement on the thing
and price, although the thing was not yet delivered nor the price paid".

4
See the course of civil law of the obligations.
5
See for this law, the Belgian Monitor of August 29, 1991.
 44

It thus results from this provision, that the formation of the sale contract requires three essential
elements: the consent of parties, the sold thing and the price. The only agreement of the parties on
the thing and the price is not always sufficient. It is also necessary that the agreement concerns all
substantial elements, taking into account the encountered cases met (ex. the delivery period).
The expressed consent must be obvious for its validity, being free from defects, in accordance with
the common law. It is not even necessary that there must be a delivery of the thing (art. 264 CCB
III).
The commercial sale is not subordinated, with regard to its validity to the drafting of writing.
However the law n° 15/2001 of 28/01/2001 amending and supplementing the law n° 35/91 of 5
August 1991 dealing with organization of the domestic trade requires that all commercial
transactions in the establishments for commercial use and among which the professional service
providers are covered with the invoices. It is the same for any good being in an establishment for
regular commercial use. This obligation to deliver an invoice is supported by the professionals
(supplier, seller or service provider.)

In commercial matters, there often is acceptance of an offer which has been previously formulated
by the seller, who was unilaterally engaged by formulating his offer. But for the offer to be definitely
constitutive of a unilateral engagement, it is necessary that it reveals the intention of offer to be
definitively bound by the only acceptance of the recipient, and that it contains all the precise
necessary details on the essential conditions of the contract. The contract will be then concluded by
the only fact of acceptance.

In the system of the Civil code, the sale is transfers ownership. The transfer of ownership and the
risks takes place solo consensu (art. 37 and 264 CCB III). When the sale relates to certain body, the
transfer of ownership occurs, except if there is a contrary convention.

This is not however the case in commercial matters where the doctrines teaches, contrary to these
provisions, that the ownership and the risks pass to the purchaser when the seller has carried out his
obligation of delivery. 6In the civil matters, the principle res perit domino accepts limitations (cfr
course of civil law of the obligations LLBII II).

6
C JASSOGNE and Mr. VAN WUYTSWINKEL, "The sale", op.cit. p. 244.
 45

1. 2. Obligations of the seller

1. 2.1. Obligation of delivery

1. Definition

Under art. 281 CCB III, the delivery "is the transport of the sold thing under the power and possession
of the purchaser". The doctrines, in particular Comlan estimate that this definition suggested by the
legislator can give place to regrettable confusions, because of its improper character. 7. In fact, the
legislator speaks about the transport of the "power" of the thing (it is necessary to understand by
this, the transfer of the right of ownership). The transfer of the thing does not result from the
delivery of the thing. It is not delivery of the thing; it is the exchange of the consent which operates
the transfer of the ownership. The author continues saying that this definition of art. 281 is also
insufficient when it binds the transfer of the possession to the delivery. The transfer of the
possession takes place at the same time as the transfer of ownership i.e. at the time of the exchange
of consents8. In reality what was transferred to the purchaser following the delivery, is neither the
ownership, nor the possession, it is the simple detention of the thing.

2. Scope and sanctions

i. Scope

Speaking about the delivery, a case of law is directed towards a functional design which implies a
handing-over of the object of the contract such as the purchaser can use it effectively following its
nature and its destination. The delivery is not limited to the physical delivery, it includes also
conformity9. It covers the agreed thing and its accessories: packing, packaging, maintenance manual,
maintenance, administrative documents, right and actions attached to the thing.

ii. Sanctions

When the seller does not carry out his obligation of delivery, the purchaser has several sanctions:

7
A. COMLAN, op. cit., p. 248.
8
Ibidem
9
Cass. Com. (France), Oct. 28. 1968, 4, n° 295; Civ., Nov. 26. 1980, Bull. Cass. 1980, 1, n° 310, D.S., 1981, I R.,
439, obs. LARROUMET.
 46

- He/she cannot carry out to its own obligation by invoking the exceptio non adimpleti contractus;
- He/she can require the possession of the thing;
- He/she finally can give up the execution of the contract and ask to be judicially released from its
contractual obligations (art. 287 CCB III): it is about the legal resolution.

It is admitted by commercial case law that the purchaser can ask for the redoing of the contract,
i.e. the contract is done again by the judge with a modification of the price.

a. Modalities of the delivery

i. The place of delivery

The place of delivery is fixed by the contract or the practice. In the absence of a convention or of the
practice, the delivery has taken place at the domicile of the seller if they are the things of kind, or
with the place where the thing was at the time of the sale if it is of a thing unquestionable body or a
thing of kind individualized. It should be noted that the tradition is the effective handing-over of the
thing to the purchaser whereas the delivery is the handing-over of the thing at the agreed place
(independently of knowing what the purchaser will do on his side).

ii. Moment of transfer of ownership and risks

According to some authors10, the ownership and the risks pass in principle to the purchaser when the
seller has carried out his obligation of delivery. According to other opinions', it is the specification
which is put into account, individualization of what was hitherto a thing of kind, to make it. This
second opinion is not easily acceptable, but in practice, the moment of specification and that of the
execution of the obligation of delivery often coincides, which reduces the interest of the controversy.
It is the same when under the terms of the conditions of sale; the seller must expedite the goods to
the purchaser.
No principle of public order prevents obviously the parties from regulating in their own way the
moment and the modalities of the transfer of ownership and the risks. It is often delayed until the
payment of the price to the profit of the seller (clauses of reserve of ownership). It should be noted
that the delayed-action of the transfer of ownership does not affect in principle any that of the risks.
11

10
VAN RYN and HEENEN, Principles of commercial law, 2nd ed. T III, p. 521
11
C JASSOGNE, Mr. VAN WUYTSWINKEL, "The sale", op.cit., p. 250.
 47

1. 2.2. Obligation of guarantee

The second obligation of the seller is to provide the guarantee (art. 303 CCB III). This obligation is
double: to ensure the purchaser the peaceful possession of the thing object of the sale, to guarantee
his contractor against the defects of the sold thing.

1. Guarantees against eviction

The implementation of this guarantee is not very frequent, especially as regards commercial sales
which generally have as an object corporeal moveable, because the purchaser is normally protected
by art. 658 CCB III. Anyhow, within the framework of this guarantee, the seller must abstain from
bringing troubles to the purchaser as regards the sold thing.

It may be a factual trouble just like it may be a legal trouble. The factual trouble does not rest on any
legal claim. 12When the purchaser is dispossessed of the thing, the seller is held to refund not only
the price of the thing, but also all the expenses that the purchaser had to make; the seller is also held
to pay the fruits of the thing; the legal authority can finally grant the purchaser an allowance of
repair.

2. Guarantees against latent defects or crippling defects: legal guarantee

One understands by latent defects, the imperfections which make the sold goods «unsuitable for the
use to which they are designated, or which decrease so much this use to the extent that , the
purchaser would not have acquired it or would have given less price if he had known them" (Article
318 CCBIII).
The vice is thus an abnormal characteristic which can be intrinsic (old concept) or functional ( a more
recent concept).

It is to the purchaser, who invokes the existence of the latent defect to assume the burden of proof.
To invoke this right to this guarantee, the following conditions must be met:

i. The defect must latent

12
For full details see the course of property law or course of the special contracts.
 48

This condition is envisaged by article 319 CCB III. The defect should not be apparent and does not
have to appear under examination. This condition disappears not only if the purchaser knew the
defect, but also he could know it, according to technical or professional knowledge which he had or
should have had, by carrying out checking in conformity with the usual practice.

ii. Dangerous defect to the use of the thing

The obligation of guarantee falls upon to the seller "because of the latent defects of the sold thing
which make it unsuitable for the use for which it is designated (art. 318 CCB III).
The use which is taken into account, is the one for which the purchaser destines his thing. The new
defect functional defect implies, that no matter how free from any intrinsic defect, does not answer
to the use that the purchaser kept in mind, being understood that this use, if it is not the normal use,
must have entered into the contract. That supposes that the seller knew or could suppose the use to
which the purchaser destined the thing. In other words, the defect must present certain gravity.

ii. It must be an unknown defect to the purchaser

To give place to guarantee, it is necessary that the purchaser did not know the defect, at the moment
of the sale. As professor J. Calais-Auloy underlines "a defect that the purchaser knew and does not
prevent him from concluding the contract is not a defect of conformity: the thing though defected , is
well that one he/she was waiting for , and the guarantee could not play ". 13
iv. It must be a question of a previous defect or concomitant to the sale

The seller is not held liable of the defects which were born after the delivery, but the guarantee
extends to all that existed already in germ at the time of the sale and which developed and revealed
thereafter. The proof of anteriority of the defect must obviously be given by the purchaser; this proof
will often be impossible if the purchaser himself carried out reparations.

The purchaser to whom the guarantee against the latent defects has an option between two actions
(art. 321 CCBIII): the actio redhibitoria (action rédhibitoire) and the actio quanto minoris( action
estimatoire)

13
J Calais-Auloy, From the guarantee of latent defects to the guarantee of conformity, Mélange Christian
MOULY, p. 72.
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The actio redhibitoria is about an action of cancelling the sale; the purchaser asks for the restitution
of the price and offers the restitution of the thing; he also has the right to refunding of the expenses
caused by the sale. This action has the aim of cancelling the sale.
The actio quanto minoris allows the purchaser who keeps the thing to obtain a reduction in the price,
fixed by the experts.

Under article 325 CCB III, the action resulting from the actio redhibitoria defects must be brought by
the purchaser, within a period of 60 day, not including the day fixed for the delivery. Let us underline
that in Belgian and French law, the actio quanto minoris is admissible only if it instituted within a
short period of time. The law not having specified what is necessary to understand by short period of
time, it is the judge who appreciates if the action is late or not.
Let us stress that the European directive 1999/44/EC on certain aspects of the sale and the
guarantees of the consumable goods of May 25, 1999 establishes a purely material time by
establishing that the responsibility for the seller is committed when the defect of conformity appears
within a period of two years since the delivery of the good (Article 5, by. 1). On the other hand, it
does not deal with the period of prescription. It allows however the Member States to provide for
period of time.
The Rwandan legislation provides that the "latent defect" must be discovered within a determined
period of 60 days and the action is only admissible if it is instituted within this period of time. It
appears that our legislation is less protective to the consumer.

The contract of sale often contains particular clauses which aim, either to extend, or to limit or
cancel the legal guarantee.
The extensive clauses of guarantee are always valid. Generally, the seller guarantees the good
functioning of the sold thing during a certain period of time; his/her obligation then includes all the
cases of bad functioning, even if the conditions of the legal guarantee against the latent defects are
not met.

1.1. 2. Obligation of the purchaser or the buyer

Under art. 327 CCBIII, the principal obligation of the purchaser is to pay the price on the day and the
place envisaged by the sale. The second obligation which imposed to the purchaser is that of
collecting the thing "art. 285 CCBIII).
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1. 1.2.1. The payment of the price and the expenses of the sale

According to art.274 CCBIII, "the expenses of acts and other accessories to the sale, are under the
responsibility of the purchaser".

1. What are expenses and other accessories envisaged in article 274 of the civil code

They are, in reality, remunerations which were paid for example to the auxiliary of justice or the
member of the legal profession who drafted the act.
It is also about tax expenses which must be paid at the time of concluding the contract. In the
relationship between the purchaser and the seller the charge of the expenses and accessories of the
sale are under the responsibility of the purchaser. But the creditors of these expenses and
accessories can address themselves to the seller as well to the purchaser in order to obtain payment.
However, when the seller has paid to the third party the expenses and the accessories, he/she has
recourse against the purchaser.

2. Moment and the place of payment

Art. 328 CCBIII fixes the time of payment at the moment when the delivery of the goods must be
carried out, but the parties to the contract can manage it differently. With regard to the place, it is
not the usual rule of the querability which applies. Art. 328 CCBIII derogates from the common law
and provides that the price is payable at the place of the delivery.

3. The amount of payment

The amount is determined in the contract of sale; in general, it is proposed by the seller and is
accepted by the purchaser.

1. 1.2.2. Obligation to accept delivery of the thing sold

This is the assumption of responsibility of the goods by the purchaser. It is thus a removal of goods
from the place where the seller had placed them at his/her disposal in accordance with the
conditions of sale. It is the counterpart of the obligation of delivery.
If no term were agreed on for retirement, this one must immediately follow the delivery, except if
there is a reasonable time to make it possible to the purchaser to pack and charge the goods. When a
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term was agreed on, its ignorance makes it possible to the seller to use of the right of cancellation
envisaged by art. 334 CCBIII. For a seller to use this right to cancel the contract unilaterally, it is
necessary that three conditions are met:

- the sale must be related to commodities or movables (goods, machines, devices or utensils, );
- a period of time must have been agreed on for retirement and constitutes according to tacit
intention of the parties, an essential condition;
- the purchaser must be in fault.

II.2.2. Sale of goods

Contract of sale of goods is a contract whereby the seller transfers, or agrees to transfer, the
property in goods to the buyer, for a money consideration called the price. For his formation, the
contract of sale of goods applies the general rules of contract.

II.2.1. Perishing of the goods

In case of a contract for the sale of specific goods:

1. If, without the knowledge of the seller, the goods have perished at the time the contract is
made, the contract is void.
2. If, without the fault of either party, the goods subsequently perish, the contract is void if the
risk has not yet passed to the buyer; if the risk has passed, the buyer bears the loss.

II.2.2. The price

The price must be paid wholly or partly in money; it may be fixed in the contract or in an agreed
manner, for example, by a third party, or by the course of dealing between the parties; otherwise the
buyer must pay a reasonable price.

II.2.3. Time of payment

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Stipulations as to the time of payment are not of the essence, unless otherwise agreed; failure to pay
by agreed date, if any, does not therefore release the seller from his own obligations under the
contract.

II.2.4. Implied terms

Conditions and warranties

In addition to the express terms of the contract, certain terms relating to the goods are implied in the
contract of sale. These terms may be either conditions or warranties. Condition is a term which goes
to the root of the contract, breach of which entitles the buyer to reject the goods and treat the
contract as repudiated, in addition to claiming damages. A warranty is a collateral term, the breach
of which gives rise to an action for damages, but does not release the buyer from his own
obligations. Whether a term is a condition or a warranty depends upon the construction of the
contract. The buyer may elect to treat a breach of condition as a breach of warranty only, and he
must do so if the contract is not severable and he has accepted any part of the goods.

II.2.5. Passing of the property

The property passes at the time the parties intend it to pass; but the property in unascertaid goods
cannot pass until they have been ascertained. In the absence of evidence to the contrary, the
property is deemed to pass in accordance with the following rules:
1. Unconditional contract for sale of specific goods in a deliverable state; the property passes
when the contract is made, even though the time of payment or of delivery is postponed. For
example when a buyer bought something, before he took it away it was destroyed by fire;
property had passed and so the loss fell on the buyer.
2. Contract for sale of specific goods, still to be put in a deliverable state; the property does not
pass until this has been done and the buyer has notice thereof.
3. Contract for sale of specific goods in a deliverable state, the price to be ascertained by the
seller weighing, measuring, etc; the property does not pass until this is done and the buyer
has notice thereof.
4. Goods delivered on approval or sale or return or similar terms; the property passes when the
buyer:
a. Signifies his approval or acceptance to seller; or
b. Does any other act adopting the transaction; or
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c. Retains the goods without giving notice of rejection within a fixed or reasonable time.
5. Contract for sale of unascertained or future goods sold by description; the property passes
when goods of that description and in a deliverance state are unconditionally appropriated
to the contract by one party with the consent of the other, for example, by the seller
delivering the goods to the buyer or to a carrier on his behalf, without reserving the right of
disposal.

II.2.6. Remedies of the unpaid seller

In the event of no-payment, the seller has remedies against the goods and against the buyer.
Remedies against the goods
1. A lien on the goods, if the property has passed and the seller is still in possession.
2. A right to stop the goods in transit and retake delivery while they are in the possession of a
carrier if the buyer becomes insolvent.
3. A right to withhold delivery, co-existent with the above rights, if the property has not passed
to the buyer.
4. An unpaid seller who has exercised his right of lien or stoppage in transit has a right of resale
only if:
a. The goods are of a perishable nature; or
b. The seller gives notice of his intention to resell, and the buyer does not tender the price
within a reasonable time thereof; or
c. The right of resale is expressly reserved in the contract.
Remedies against the buyer
- Action for the price
The seller can sue the buyer for the price if the property has passed to the buyer; or a date for
payment, irrespective of delivery, has been agreed, even though the property has not passed.
- Action for damages for non-acceptance
If an action for the price is not available, the seller may claim damages if the buyer wrongfully refuses
to accept and pay for the goods. The measure of damages is the estimated loss directly and naturally
resulting in the ordinary course of events from the buyer’s breach of contract.

II.2.7. Remedies of the buyer

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The buyer may have one or more of the following remedies in the event of a breach of contract by
the seller. If the seller wrongfully neglects or refuses to deliver the goods; the damages are
calculated in the same manner as in action for damages for non acceptance (above). This is remedies
for damages for non-delivery.

II.2.8. International sale of goods

Certain kinds of contract are concluded more often than others, for example contract of sale, lease
and employment. Of these the contract of sale is probably the most common kind of contract. It is
virtually impossible to live or carry on any kind of business without either purchasing or selling goods
from time to time. Central to the operation of international trade is the contract of sale which
underlies importation and exportation of goods.

The sale of goods is defined as a contract by which a seller transfers or agrees to transfer the
ownership of goods to a buyer in exchange for money price. If the ownership is to pass in future time
the contract is called agreement to sell.

However, the contract of sale is the not the only transaction by which international trade may be
carried on. Closely aligned and of continuing importance, especially in trade between or within
developing countries, is the contract of barter and more generally, the method of trading known as
countertrade.

One simple example of barter in the context of international trade is that goods originating and
delivered from one country are not paid for money from another country (the latter may be
experiencing foreign exchange difficulties resulting in the refusal of permission for money to leave
the country), but are exchanged for goods of a different nature (for instance, raw materials are
exchanged for finished products) or even for intangibles, such as services. In such a case one has to
do with a contract of barter or exchange.

If goods are paid partly in money and partly in exchanged goods, the intention of the parties will be
decisive in determining whether what was concluded between them was a contract of sale in which
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the price is made up of both money and goods, or a contract of barter in which as sum of money was
of necessity involved in equalising the values of the sets of goods exchanged between the parties,
that is, in which money was employed as a makeweight. If the parties’ intention is not clear, the
transaction between them may be presumed to be exchange if the monetary element of the counter
performance is less in value than that of the exchange goods, that is, if the payment in cash is less
that the payment kind.

There also transactions other than international sales and barters which play an important role in
international trade. By virtue of such contracts it is not goods which move from one country to
another but other, often intangible, objects such as services, money, technology or expertise.
International contracts of loans or investment, international contracts for the transfer of know-how, ,
show-how, trade secrets, patents , trade and service, marks and other intellectual property rights are
but some of the examples which may be mentioned.

By its very nature a contract of sale of goods involves a foreign element. The fact that a Rwandan
national is involved, whether as a buyer (import sale) or as a seller ( export sale ), does not
necessarily mean that the rights and obligations of the parties to the contract will be governed by,
and will in the event of a dispute have to be ascertained with reference to, Rwandan law. The
determination of the applicable legal system falls within the province of Rwandan private
international law, also known as the rules of conflict of laws which is not dealt with in this course but
in Private international law. For the purpose of his chapter, we shall deal with the United Nations
Conventions on contract of international sale of goods.