LAW 1

INDEX

CONTENTS
Lesson 1. Sources of Kenya Law and the Administration of the Law.

Lesson 2. The Law of Persons

Lesson 3. The Law of Contract.

Lesson 4. Law of Agency and Partnership.

Lesson 5. Sale of Goods and Hire Purchase .

Lesson 6. Negotiable Instruments and Securities Law.

Lesson 7. Insurance and Carriage Law.

Lesson 8. The Law of Torts and the Law of Succession.

Lesson 9. The Law of Property

REVISION AID

Lesson 10. KASNEB Syllabus

Model answers to reinforcing questions
Selected past CPA papers with model answers. Work through model answers ensuring they are
understood.
On completion, submit final assignment to Strathmore.

FINAL ASSIGNMENT
MOCK EXAMINATION
 THE NATURE AND SOURCES OF LAW
AND ITS ADMINISTRATION

CONTENTS
1.0 The Nature and Classification of law
1.1 The sources of Kenya Law
1.2 Statute Law
1.3 Common Law
1.4 Equity
1.5 African Customary Law
1.6 Islamic Law
1.7 Hindu Law
1.8 The Kenya judicial system
1.9 Special Courts
1.10 Case Law and Judicial precedent
1.11 The Court System
1.12 Legal profession

MODE:
1. Read the Study Text provided below
2. Assigned readings: Chapters 1, 2 and 3 of Hussein
3. Attempt the reinforcing questions given at the end of the lesson
4. Compare your answers with those given in lesson 9
NATURE AND CLASSIFICATION OF LAW
The term “law” has no assigned meaning. It is used in a variety of senses. Though different writers
have attempted to explain the term, no generally acceptable explanation has been given. Different
writers explain the term law from different points of view. The study of law is referred to as
jurisprudence or legal philosophy.

According to Hart Law is a coercive instrument for regulating social behaviour. Law has also been
defined as a command backed by sanctions. These two explanations of the term law presuppose the
existence of a sovereign, which prescribes or formulates the commands and enforces sanctions, which
is not necessarily the case.

According to Salmond, law consists of a body of principles recognised and applied by the state in the
administration of justice. Law has also been defined as a collection of binding rules of human conduct
prescribed by human beings for obedience of human beings. Inevitably, therefore law implies rules or
principles enforced by courts of law. Rules of law are binding hence differ from other rules or
regulations. Rules of law are certain.

In summary therefore, law is an aggregate of conglomeration of rules enforced by courts of law at a

given time.

Rules of law originate from acts of parliament, customary and religious practises of the people, they may
also be borrowed from other countries.

Law and Morality

Morality consists of prescriptions of the society and is not enforceable, however, rules of law are
enforceable. Wrongs in society are contraventions of either law or morality or both.

However, law incorporates a significant proportion of morality and to that extent morality is enforceable.
However, such rules/contraventions are contraventions of law for example murder, rape theft by servant
or agent.

Purposes or Functions of Law

(i) Rules of law facilitate administration of justice. It is an instrument used by human beings to
achieve justice.

(ii) Law assists in the maintenance of peace and order. Law promotes peaceful co-existence, that is,
prevents anarchy.

(iii) Law promotes good governance.

(iv) Law is a standard setting and control mechanism.

(v) Provision of legal remedies, protection of rights and duties

.
Types and Classification of Law

Rules of law may be classified as:

• Written
• National and International
 • Public and Private
• Substantive and Procedural
• Criminal and Civil

Written Law
These are rules of law that have been reduced into a written form. They are embodied in a formal
document for example The Constitution of Kenya, laws made by parliament (statutes). Such laws
prevail over unwritten Law.

Unwritten Law
These are rules of law that have not been reduced into written form. They are not embodied in any
single document for example African Customary Law, Islamic Law, Hindu Law, Common Law, Equity.
Their existence must be proved.

National or Municipal Law

These are rules of law operational within the boundaries of a country. It regulates the relation between
citizens and between citizens and the state. It is based on Acts of Parliament, customary and religious
practices of the people.

International Law
It is a body of rules that regulates relations between countries/states and other international persons egg
United Nations. It is based on international agreements of treaties and customary practices of states and
general principles.

Public Law
It consists of those fields or branches of law in which the state has an interest as the sovereign egg
criminal law, constitutional law, administrative law.

Public law is concerned with the constitution and functions of the various organs of government
including local authorities, their relations with each other and with the citizens. Public law asserts state
sovereignty/power.

Private law
It consists of those fields or branches of law in which the state has no direct interest as the sovereign egg
law of contracts, law of tout, law of property, law of succession.

Private law is concerned with day to day transactions of legal relationships between persons. It defines
the rights and duties of parties.

Substantive Law
It is concerned with the rules themselves as opposed to the procedure on how to apply them. It defines
the rights and duties of parties and provides remedies when those rights are violated e.g. law of contract,
negligence, defamation. It defines offences and prescribes punishment e.g. Penal Code Cap 63.

Procedural Law
It consists of the steps or guiding principles or rules of practice to be complied with or followed in the
administration of justice or in the application of substantive law.
It is also referred to as adjective law e.g. Criminal Procedure code Cap 75, civil procedure Act Cap 21.

Criminal Law
Criminal law has been defined as the law of crimes. A crime has been defined as an act or omission,
committed or omitted in violation of public law egg murder, manslaughter, robbery, burglary, rape,
stealing, theft by servant or agent.
All crimes or offences in Kenya are created by parliament through statutes. Suspects are arrested by the
state through the police. However, individuals have the liberty to arrest suspects. Offences are generally
prosecuted by the state through the office of the Attorney General.

When charged with a particular offence the suspect becomes an accused hence criminal cases are
styled as R V Accused. Under sec 77 of the constitution the person cannot generally be prosecuted
for an act or omission which was not defined by law as a crime when committed or omitted. Under
section 77 (2) (a) of the constitution an accused person is presumed innocent until proven or has
pleaded guilty. It is the duty of the prosecution to prove its case against the accused. The burden of
proof rests on the prosecution.

The standard of proof in criminal cases is beyond any reasonable doubt. In the event of any
reasonable doubt the accused is set free (acquitted). The court must be satisfied that the accused
committed offence as charged. If the prosecution discharges the burden of proof the accused is
convicted and sentenced which could take any of the following forms.

(a) Imprisonment term

(b) Capital punishment
(c) Corporal punishment
(d) Community service
(e) Fine
(f) Conditional discharge
(g) Unconditional discharge

The purpose of criminal is;

• To ascertain whether or not the crime has been committed.
• To punish the crime where one has been committed.

Civil Law
Civil law is concerned with violations of private rights in their individual or corporate capacity egg
breach of contract, negligence, defamation, nuisance, passing off trespass to the person or goods.

If a person’s private rights are violated, the person has a cause of action. Causes of action are
recognized by statutes and by the common law. The person whose rights have been allegedly violated
sues the alleged wrong doer. Hence civil cases are styled as Plaintiff v Defendant. It is his duty of
the plaintiff to adduce evidence to prove his case the burden of proof lies on the plaintiff.

The standard of proof in civil cases is on a balance of probabilities or on a preponderance of

probabilities. It must be more probable than improbable that the plaintiff’s allegations are true. If the
plaintiff discharges the burden of proof then he wins the case and is awarded judgement which could
take any of the following forms:

(a) Damage, i.e. monetary compensation

(b) Injunction
(c) Specific performance
(d) Tracing
(e) Accounts
(f) Rescission
(g) Winding up/liquidation

Purpose of civil laws

(i) Protection of rights and enforcement of duties.
(ii) Provision of legal remedies as and when a persons rights have been violate
SOURCE OF KENYA LAW AND ADMINISTRATION OF THE LAW

1. SOURCES OF KENYA LAW

1.1 A source of law is the origin of the rule, which constitutes a law, or legal principle. The
phrase `sources of Kenya law' therefore means the origin of the legal rules which
constitute the law of Kenya.

The various sources of law of Kenya are identified by the Judicature Azt, Kadhis Court
Act, the Constitution, Hindu Marriage and divorce Act and the Hindu Succession Act.
1.2 The Judicature Act Cap 8, Laws of Kenya

The sources of Kenya law are specified in the Judicature Act 1967, S.3(1) of which states that
the jurisdiction of the High Court, the Court of Appeal and all subordinate courts shall be
exercised in accordance with:

(i) the constitution;

(ii) subject thereto, "all other written laws", (including certain Acts of Parliament of the
United Kingdom which are cited in Part I of the Schedule to the Act), and

(iii) subject thereto and so far as the (aforesaid) written laws do not extend or apply:
(a) the substance of the common law;
(b) the doctrines of equity, and
(c) statutes of general application in force in England on 12th August 1897.

S.3 (2) states that "the High Court, the Court of Appeal and all subordinate courts shall be
guided by African customary law in civil cases in which one or more of the parties is
subject to or affected by it, so far as it is applicable and is not repugnant to justice and
morality or inconsistent with any written law".

1.3 The Kadhi's Courts Act 1967

Section 5 of the Kadhi's Courts Act provides that a Kadhi's Court shall have and exercise
jurisdiction in matters involving the determination of Muslim Law relating to personal status, marriage,
divorce or inheritance in proceedings in which all the parties profess the Muslim religion. This provision
constitutes Muslim Law a source of Kenya law for the specified purposes.

1.4 The Hindu Marriage and Divorce Act 1960, S.5 (1) provides that a marriage between
Hindus may be solemnized in accordance with the customary rites and ceremonies of either
party thereto.

The provision constitutes Hindu custom a source of Kenya law for the specified purposes.

1.5 The Legal Pyramid

The sources of Kenya law mentioned above may be summarised with the aid of the following
diagram or "legal pyramid":
 Delegated
legislation

NOTE:

The sources of Kenya law consist of

(a) written laws, and
(b) unwritten laws.

1. The unwritten laws are derived, generally speaking, from the customs of the ethnic groups
which constitute Kenya's indigenous population and the rules or rites of Islam and
Hinduism.

There is nothing strange or peculiar about this situation. In England, for example, the
general customs of the English people constitute a major source of English law which is
known as the common law. The principles of Christianity have also made some
contribution to the development of English law, especially family law.

2. A written law is defined by the Interpretation and General provisions Act as:

(a) an Act of Parliament for the time being in force (other than the Constitution);

(b) an applied law; or

(c) any subsidiary legislation for the time being in force.

1.6 STATUTE LAW

This is an Act of Parliament. This is law made by parliament directly in exercise of legislative
power conferred upon it by the constitution.
 Section 46(5) of the Kenya Constitution states that "a law made by Parliament shall be styled
an Act of Parliament".

1.7 Bills

An Act of Parliament begins as a Bill, which is the draft of law that Parliament intends to
make. Section 46(1) of the constitution states that "the legislative power of Parliament shall be
exercisable by Bills passed by the National Assembly".

Types of Bills

A Bill may be:

(i) A Government Bill, if it is presented to Parliament by the Government with a view to its
becoming a law if approved by Parliament.

(ii) A Private Members' Bill if it is presented to Parliament by some members, in a private

capacity and not on behalf of the Government.

Bills may also be divided into Public Bills and Private Bills.

(a) A Bill, whether a Government Bill or a Private Members' Bill, is a Public Bill if it seeks
to alter the law throughout Kenya. An example is the abortive Marriage Bill, 1979,
whose aim was to introduce a uniform marriage law for all Kenyans irrespective of their
racial, religious or ethnic differences.

(b) A Private Bill if it does not seek to alter the general law but rather to confer special local
powers. An example is where a local authority such as a Municipal Council requires
power to purchase land compulsorily.

PROCEDURE FOR ENACTMENT OF LAWS

The procedure to be followed in Parliament in order to enact Law is governed by Constitution and
Orders 94-125 of National Assembly Standing Orders, as amended up to and including 22nd July, 1983.

A Government Bill and a Private Members' Bill follow the same procedure pursuant to Order 116 which
provides that, except as otherwise provided in Part XVI of the Orders, the Standing Orders relating to
Public Bills shall apply in respect of Private Bills. The exceptions provided for, briefly, are that before a
Private Bill can be introduced:

(i) the promoters thereof must have presented to the House a copy of the Bill annexed to a petition for
leave of the House to proceed with publication of the Bill;

(ii) the promoters must have deposited with the Clerk to National Assembly a sufficient number of
copies of the petition with the Bill annexed, for distribution to the members; and

(iii) the petition must have been read at the first sitting of the House after its deposit and the question
"That the promoters be granted leave to proceed" must have been put forthwith and decided without
amendment or debate.
Order 120 provides that where leave to proceed is granted the promoters shall:

(i) pay to the Clerk a fee of £10 for his own use.

(ii) deposit with the Government Printer the sum of £100 as security for the cost of printing the Bill,
and
(iii) deposit with the Clerk a bond by two persons, acceptable to the Clerk, obliging such persons to pay
the Government Printer any expense of printing in excess of £100.

Order 117 provides that 'every private Bill shall contain a clause saving the rights of the President, the
Government of the Republic of Kenya, of all bodies politic or corporate, and of all others, except such as
are mentioned in the Bill and those claiming by, from or under them'

Publication of Bills in the Kenya Gazette

Order 98 provides that no Bill shall be introduced unless it has been published in the Gazette and a
period of fourteen days beginning with the day of such publication, or such shorter period as the House
may resolve with respect to the Bill, has ended. However, the period of publication for a Consolidated
Fund Bill, an Appropriation Bill or a Supplementary Appropriation Bill is seven days only.

READINGS

• First Reading
Order 101 provides that "every Bill shall be read a First Time without motion made or question put
and shall be ordered to be read a second time on such day as the member in charge of it shall
appoint". No debate takes place.

The first reading is therefore a mere formality.

• Second Reading
During the second reading the general merits of the Bill may be debated and any necessary
amendments are proposed to the various clauses it contains. Every member wishing to contribute is
offered the opportunity.

• Committal Stage
Order 103 provides that a Bill having been read a second time shall stand committed to a committee
of the Whole House, unless the House commits the Bill to a select committee of members of
parliament for a critical analysis.

Order 104 provides that all committees to which Bills are committed shall have power to make such
amendments thereto as they think fit, and shall report the amendment to the House.

• Report Stage
Order 106(12) provides that at the conclusion of the proceedings in committee on a Bill a Minister,
or the member in charge, shall move "That the Bill (as amended) be reported to the House", and the
question thereon shall be decided without amendment or debate. The chairman of the select
committee lenders its report to the National Assembly.

• Third Reading
It is provided in Order 112(1) that on the adoption of a report on a Bill the Third Reading may with
leave of Mr. Speaker be taken forthwith and if not so taken forthwith shall be ordered to be taken on
a day named by the member in charge of the Bill.

Order 112(2) provides that on the third reading of a Bill amendments may be proposed similar to
those proposed on second reading.

THE PRESIDENT'S ASSENT

Under section 46(2) of the Constitution a Bill passed by the National Assembly must be presented to
the President for his assent. |The President must signify his assent or refusal to the speaker of the
National Assembly within 21 days of receipt of the Bill. If he refuses to assent, he must within l4 days
thereof deliver to speaker a written memorandum of the provisions he would like reconsidered and his
recommendations and the National Assembly may either:

(a) Re-pass the Bill incorporating the Presidents recommendation with or without amendments and
resent it for his assent or

(b) Re-pass the Bill in its original form thus ignoring the President’s recommendations. If the
resolution to re-pass the Bill is such is supported by at least 65% of all members excluding ex-
officio members the President must signify his assent within 14 days of the resolution.

PUBLICATION

Section 46(3) of the constitution states that `upon a Bill that has been passed by the National Assembly
being presented to the President for assent, it shall become law and shall thereupon be published in the
Kenya Gazette as a law'. The wording of this section does not appear to prescribe the President's assent
as a condition precedent to the enactment of a Bill, although in practice the assent is so regarded. This is
so because the constitution uses the words "upon ... being presented" and not "after assent", or "upon
assent".

COMMENCEMENT

Section 46(4) of the constitution provides that a law made by Parliament shall not come into operation
until it has been published in the Kenya Gazette. But it also empowers Parliament, subject to certain
exceptions, to postpone the coming into operation of any law and to make laws with retrospective effect.

ADVANTAGES AND DISADVANTAGES OF ACTS OF PARLIAMENT

An Act of Parliament may be said to possess the following advantages:

(i) Democratic in nature

It is democratic in the sense that it reflects the wishes of Kenyans as to what the law should be.
This is because it is made by a Parliament which consists of representatives of the people who are
elected at intervals of not more than five years.

(ii) Resolution of Legal Problems

It enables Parliament to find legal solutions to any problem that the country may face. An English
judge once stated that an Act of Parliament can in theory deal with any problem except that it
cannot change man to woman, (although it may provide that reference therein to `man' shall include
'woman'.)
(iii) Dynamic
It enables new challenges that emerge in the course of social development to be legally dealt with
by the passing of new Acts of Parliament, or amending some of the existing Acts.

(iv) General Application

It is usually a statement of general principles and rules and can therefore be applied to different
situations in a flexible manner as determined by the court in a particular situation.

(i) Uniformly Applied.

It applies indiscriminately.
(ii) Publicity

Statute law is the most widely published source of law.

DISADVANTAGES OF STATUTE LAW

(i) Imposition of law

Some Acts are imposed on the people and reflect the views of the Executive, or pundits in the ruling
political party.

Having observed the working of the British Parliament over a period of forty five years James
Margach has stated in his book, `The Anatomy of Power', that "the reality is that the modern
Parliament has become in practice a central registry for recording votes and giving effect to
decisions taken elsewhere in the Cabinet and in Government Departments. Parliament now governs
only in the technical formal sense", and largely rubber-stamps what is put before it by the
Executive.

Although it is rather early to precisely state what the position of the Kenya Parliament is, some
recent events indicate that during the one-party era its role in crucial or sensitive political issues
corresponded to that of the British Parliament as stated above by Mr. Margach, namely, to rubber-
stamp what is put before it by the Executive, at the behest of some politically powerful individuals
who held key administrative positions in the ruling political party, KANU.

(ii) Wishes of members of parliament

Acts of Parliament do not reflect the wishes of the people (voters) but the wishes of the individuals
who constitute Parliament at any given time. During debates on Bills, Members of Parliament
express their personal views and finally enact laws on the basis of those views. They do not hold
meetings in their constituencies to ascertain what the people's views on Bills are so that they may
eventually report back to Parliament what those views are and then vote on the Bills in accordance
with those views.

(iii) Bulky and technical Bills

Some Bills are so bulky and technical that they are passed without sufficient debate because
Parliament lacks the time and knowledge to consider them in detail.

Examples are Finance Bills.

(iv) Formalities
The process of enacting a statute that would substantially conform to the wishes of the people
affected by it would be very slow. This is because very many public meetings must be held before
a consensus on the proposed law can be reached. The delay in re-introducing the abortive Marriage
Bill, 1979 illustrates this point.

STATUTORY INTERPRETATION

The precise meaning of a law written in an Act may cause a legal dispute. This is so because, although
the law is written and can therefore be read by any literate person, some of the words thereof may not
mean the same thing to different readers. This fact has been confirmed by the arguments adduced in
court by parties to such disputes.

Principles and Presumptions of Construction

In the course of settling some of these disputes the courts in England have elaborated the rules which
they will use in order to interpret, if necessary, any Act. Assuming that the same rules have been or will
be adopted by Kenya courts, they may be summarised as follows:

(i) Literal rule

The primary rule of interpretation is known as the literal rule. It requires judges to interpret the
words of a statute according to their grammatical or literal meaning.

Generally speaking, every word in an Act must be given a meaning and no word is to be added to,
or taken from, the Act.

(ii) ‘Mischief’ rule (Rule in Heydons Case)

Under this rule the court will examine the Act to ascertain what its purpose was and the 'mischief',
or defect, in the common law that it was intended to remove. This rule was explained in
HEYDON'S CASE as follows:

"Four things are to be discussed and considered:

(i) what was the common law before the making of the Act?

(ii) what was the mischief and defect for which the common law did not provide?

(iii) what remedy has Parliament resolved and appointed to cure the disease?

(iv) what is the true reason for the remedy? Judges shall.... make such construction as shall
suppress the mischief and advance the remedy".

A statute will only be construed in accordance with this rule if its construction in accordance with
the literal rule would fail to suppress, or punish, the mischief. An example of this can be seen in the
case of SMITH v HUGHES where it was held that a prostitute who attracted the attention of passers
by from a balcony window above the street had solicited in a street within Section 1(1) of the
English Street Offences Act, 1959. The judge stated as follows:

"I approach the matter by considering what is the mischief aimed at by this Act. Everybody knows
that this was an Act intended to clean up the streets, to enable people to walk along the streets
without being molested or solicited by common prostitutes".

Viewed in that way, the actual place from which a prostitute attracted the attention of somebody
walking in the street did not matter, and she will be deemed to have solicited in the street

(iii) The ‘Golden’ rule

The so-called ‘golden’ rule will be used by the court in order to avoid arriving at an absurd decision
under the literal rule of construction. It was explained by Parker B in case of BECKE v SMITH as
follows:
“It is a very useful rule, in the construction of a statute, to adhere to the ordinary meaning of words
used, and to the grammatical construction, unless that is at variance with the intention of the
legislature, to be collected from the statute itself, or leads to any manifest absurdity or repugnance,
in which case the language may be varied or modified.”.
 An example of the application of the rule is INDEPENDENT AUTOMATIC SALES LTD v
KNOWLES & FOSTER where it was held that a debt may be regarded as a "book debt" within s.95
(2)(e) of the English Companies Act 1948 even though it has not been entered in the books of the
business, provided that it would or could in the ordinary course of such business be entered in well-
kept books relating to that business. To restrict the phrase "book debts" to those debts entered in the
books of the business would have entailed an unrealistic and illogical categorization of the debts of
the business.

(iv) The ‘Ejusdem generis’ rule

This rule states that where general words in an Act follow particular words, the general words are to
be construed as being limited to the persons or things within the class designated by the particular
words. For example, in a reference to "cows, goats, donkeys and other animals" the general words
"other animals" would be construed to mean animals of the same genus or species as cows, goats
and donkeys, that is, domestic animals, and would not include wild animals such as zebras,
antelopes or tigers.

(v) Expressio unius est etclusio ullerius

(vi) Nositier a Soiis

(vii) Rendedo Singular Singular

(viii) A statute must be constued as a whole

(ix) Rank Principle

(x) Statutes in Pari maleria

In EVANS v CROSS, Evans was charged with ignoring a traffic sign, namely, a white line painted
in the middle of a road, when overtaking on a bend into the road, contrary to Section 49 of the U.K.
Road Traffic Act, 1930. Section 48(10) of the Act defined a traffic sign as "all signals, warning
signposts, direction posts, signs or other devices". It was held that the words "or other devices"
must be construed 'ejusdem generis' the preceding words and, therefore, the white painted line on
the road was not a traffic sign. Evans had therefore not committed an offence under the section

The other points to be noted in relation to judicial interpretation of Acts are as follows:

(a) No clause of an Act is to be construed in isolation but in relation to the other clauses of the
Act, and the context, so as to arrive at a consistent meaning of the whole Act.

(b) In England, the judges do not refer to the passages in HANSARD, the legislative history of an
enactment or the explanatory memoranda which preface the Bills before Parliament, in order to
arrive at a conclusion on the possible meaning of the words therein. It is not clear whether the
Kenya courts will adopt the same approach.

(c) In ASSAM RAILWAYS AND TRADING CO. LTD. v. I.R.C. Lord Wright stated:

"It is clear that the language of a Minister of the Crown in proposing in Parliament a measure
which eventually becomes law is inadmissible". The English courts cannot therefore look at it
for the purpose of construction. It is not yet known whether Kenya courts will adopt the same
view.
 (d) Reports of Commissions or Committees which preceded the legislation are not looked at by
English courts for the purpose of construction. For example, in KATIKIRO OF BUGANDA v
ATT. - GENERAL a White Paper containing the recommendations of a constitutional
conference held in Uganda was held inadmissible as an aid to the construction of the Buganda
Agreement 1955 Order-in-Council 1955. Again, what the attitude of the Kenya courts is on
this is yet to be judicially made known.

(e) Lord Coleridge stated in Rv PETERS that "I am quite aware that dictionaries are not to be
taken as authoritative exponents of the meanings of words used in an Act of Parliament, but it
is a well-known rule of courts of law that words should be taken to be used in their ordinary
sense, and we are therefore sent for instruction to these books".

This means that a court may refer to, or consult, dictionaries in the absense of any judicial
guidance or authority but it is not bound by what is stated therein.

(f) Textbooks may also be referred to for assistance in finding the true construction of a statute but
Lord Goddard stated in BASTIN v DAVIES that a court would never hesitate to disagree with
a statement in a textbook (however authoritative or however long it had stood) if it is thought
right to do so.

PRESUMPTIONS

In their attempt to construe statutes, courts of law are guided by the following presumptions or
Assumptions.

(a) That the statute was not intended to change or alter the common law.
(b) That the statute was not intended to affect the crown.
(c) That the statute was not intended to interfere with vested rights of individual.
(d) That the statute was not intended to impose liability without fault.
(e) That the statute was not intended to have extra-territorial effect.
(f) That the statute was not intended to be inconsistent with international law.
(g) that an accused person is presumed innocent until proven or has pleaded guilty.

APPLIED LAWS

Section 2 of the Interpretation and General Provisions Act defines an "applied law" as:

(a) an Act of the legislature of another country or an order in council of the United Kingdom; or

(b) subsidiary legislation made under any of the foregoing, which is for the time being in force in
Kenya.

SUBSIDIARY LEGISLATION

This is subordinate or delegated indirect legislation.

Section 2 of the Interpretation and General Provisions Act defines subsidiary legislation as 'any
legislative provision (including a transfer or delegation of powers or duties) made in exercise of any
power in that behalf conferred by any written law by way of by-law, notice, order, proclamation,
regulation, rule of court or other instrument'. The by-laws, notices, orders, regulations, rules and other
'instruments' constitute the body of the laws known as subsidiary legislation.
Although section 30 of the Constitution provides that 'the legislative power of the Republic (of Kenya)
shall vest in the Parliament', it is not possible for Parliament itself to enact all the laws that are required
to run all the affairs of this country. Many Acts of Parliament require much detailed work to implement
and operate them. In such a case the Act is drafted so as to provide a broad framework which will be
filled in later by subsidiary legislation made by Government Ministers or other persons under powers
conferred on them by the Act.

ADVANTAGES

Some of the advantages of delegated legislation are:

(a) Compensation of lost Parliamentary time

Parliamentarians are politicians who have to spend much of their time in their constituencies in
order to initiative various harambee projects, explain relevant party or government programmes to
the people and listen to the problems of their electors. The time so spent constitutes a significant
reduction of the time required by Parliament for legislation and this reduction can only be
compensated for by delegating some of Parliament's legislative powers.

(b) Speed
Sometimes an urgent law may be needed. Parliament may not respond to this need, first, because of
the slow and elaborate nature of Parliamentary legislative procedure and second, because it is not in
session at the material time.

A Government Minister with relevant powers can respond more effectively through subsidiary
legislation which can be enacted in one day, if necessary.

(c) Technicality of subject matter

Parliamentarians are not experts on all matters that may require legislation. It may therefore be
advisable, if not inevitable, for Parliament at times to delegate the enactment of laws of a technical
nature to Government Ministers who will be assisted by the technical officers in Government
Ministries and the Attorney-general's chambers.

(d) Flexibility
The procedure adopted by Ministers to enact laws are flexible and, as stated above, responsive to
urgent needs. The flexibility is a consequence of the fact that they are not governed by the elaborate
Standing orders that are an essential feature of parliamentary legislative procedure.

A Minister is free to discuss with his officers, and adopt, the procedure that appears most
appropriate in the circumstances.

DISADVANTAGES

Subsidiary or delegated legislation has been criticised for a variety of reasons, the main ones being that it
is:
(a) Less democratic
The real or ultimate makers of subsidiary legislation are the technical officers in the various
government ministries. These officers have not been elected by the people affected by the laws they
make and cannot therefore be made accountable for any undesirable law they make. To that extent,
delegated legislation lacks the democratic spirit that usually inspires, and manifests itself in,
parliamentary legislation. The people of Kenya can always refuse to re-elect parliamentarians who
enacted a law that they feel should not have been enacted but they cannot dismiss the civil servants.
Lord Hewart has called this situation "the new despotism".
(b) Difficult to Control
Although Parliament is theoretically supposed to control subsidiary legislation this is not so in
practice. The various rules or regulations made by government ministries are so numerous that
Parliament cannot check whether their makers conformed to its intentions or objectives. The
question that usually comes to the mind is that, if Parliament is too busy to make the law, how can it
have the time to scrutinize it?

• Inadequate publicity
• Sub-delegation and abuse
• Detail and complexity

JUDICIAL CONTROL

The courts can declare any law made as subsidiary legislation to be invalid under the ultra vires doctrine.
The law may be declared either substantively or procedurally ultra vires.

(a) Substantive Ultra Vires

A law may be declared substantively ultra vires if the maker had no powers to make it. This may
occur in a number of ways. For example, the Minister or Authority may have:

(i) exceeded the powers given by the Act;

(ii) exercised the power for another purpose rather than the particular purpose for which it was
given, or

(iii) acted unreasonably, in the sense explained by Greene, M.R. in Associated Provincial Picture
Houses Ltd v Wednesbury Corporation
(b) Procedural Ultra Vires

A law will be declared procedurally ultra vires if the mandatory procedures prescribed in the
enabling Act for its enactment are not followed, such as failure to publish it in the Gazette. An
example is the case of Mwangi V.R. in which Mwangi and another person were prosecuted and
convicted in the Special Magistrate's Court, Nairobi, for charging one shilling instead of fifty cents
for a haircut, contrary to Price Controller's Order No.20 of 1948 which had been made pursuant to
Regulation 11(1) of the Defence (Control of Prices) Regulations, 1945.

On appeal, the convictions were set aside when the court's attention was drawn to the fact that the
Order had not been published in the Gazette as should have been done. The order was therefore
void and nobody could be charged for allegedly violating its provisions.

LEGISLATIVE OR PARLIAMENTARY CONTROL

(i) Parliamentary approval

(ii) Ministerial approval
(iii) Publication in the Kenya Gazette
(iv) Circulation of draft rules to interested parties.
(v) Delegation of legislative power to selected persons and bodies
(vi) Prescribes the scope and procedure of law making.

TYPES OF SUBSIDIARY LEGISLATION

The definition of subsidiary legislation in s.2 of the Interpretation and General Provisions Act reflects the
great variety of nomenclature used by lawyers in relation to delegated legislation. However, the
following are the two major groups into which they fall:
(i) By-Laws
By-Laws are usually made by Local Authorities, such as the Mombasa Municipal Council, under
the Local Government Regulations Act, 1963. Another example are the by-laws made by the
members of co-operative societies under Rule 7 of the Cooperative Societies Rules 1969.

(ii) Rules
Rules are usually made by Government Ministers with the assistance of technical officers employed
by their Ministries. An example are the Cooperative Societies Rules, 1969 which were made by the
Minister for Co-operative Development under powers conferred on him by s.84 of the Co-operative
Societies Act, 1966.

Rules made by Government Ministers may also be called Regulations, Orders, Notices or
Proclamations.

(iii) Statutes of General Application

Although there is no authoritative definition of a "statute of general application" the phrase is
presumed to refer to those statutes that applied, or apply, to the inhabitants of England generally. In
the case of I v I the High Court held that the Married Women's Property Act 1882 is an English
statute of general application that is applicable in Kenya.
These laws are applicable only if:

(a) They do not conflict either with the constitution or any of the other written laws applicable in
Kenya, and

(b) The circumstances of Kenya and its inhabitants permit. In I v I the High Court held that the
English Married Women's Property Act 1882 was applicable in Kenya because, in the court's
view, the circumstances of Kenya and its inhabitants do not generally require that a woman
should not be able to own property.

A statute of general application which was in force in England on 12th August, 1897 but has been
repealed by an English statute enacted after that date presumably remains a prima facie source of
Kenya Law unless the repealing statute has been specifically incorporated into Kenya Law. An
example is the Infants Relief Act 1874 .

APPLICATION OF THE UNWRITTEN SOURCES OF KENYA LAW

It is a rule of Kenya Law that unwritten laws are to be applied subject to the provisions of any applicable
written law. This is a consequence of the constitutional doctrine of parliamentary supremacy and the fact
that written laws are made by parliament, either directly or indirectly.

When it is said that an unwritten law is applied subject to a written law it does not mean that a written
law is more important than an unwritten law. It only means that if any rule of unwritten law (for
example, a rule of African customary law) is in conflict with a clause in a written law, the unwritten law
will cease to have the force of law from the moment the written law comes into effect.

This rule enables Parliament to make new laws to replace existing customs as social conditions change.
It also obviates the possibility of having two conflicting rules of law regarding one factual situation.

An unwritten law that is not in conflict with a written law is as binding as any written law and a breach
of it renders what has been done as illegal as if the law broken was a written law.

THE UNWRITTEN SOURCES OF KENYA LAW

COMMON LAW
Common law may be described as that branch of the law of England which was developed by the
English courts on the basis of the ancient customs of the English people. Osborn's law dictionary defines
the common law as "that branch of the law of England formulated, developed and administered by the
old common law courts on the basis of the common custom of the country".

It is not the entire common law that is a source of Kenya law but only that portion which the Judicature
Act describes as "the substance of the common law". This presumably means that the writ system and its
complex rules of procedure that were developed by the old common law courts for the administration of
the common law do not apply to Kenya.

EQUITY

The word "equity" ordinarily means "fairness" or "justice". As a source of Kenya law, the phrase
"doctrines of equity" means the body of English law that was developed by the various Lord Chancellors
in the Court of Chancery to supplement the rules and procedure of the common law. The Lord
Chancellors developed equity mainly according to the effect produced on their own individual
conscience by the facts of the particular case before them.

Equity was developed as a result of the defects of the common law. The following are some of those
defects:

(a) The Writ System

(b) A person intending to commence an action at common law had to obtain a 'writ' from
the government department that was authorized to issue writs. A writ was a
document in the King's name and under the Seal of Crown commanding the person to
whom it was addressed to appear in a specified court to answer the claim made
against him by the person at whose request the writ had been issued. However, there
were some injuries for which no writs were available at common law owing to the
fact that, at that particular time of the common law's growth, writs could only be
issued in a limited number of cases. An example is the tort of nuisance affecting
one's enjoyment of land for which no writ existed at the time. In such cases the
injured person could not take the wrongdoer to any of the common law courts and
was, as a consequence, left without a remedy for a wrong inflicted. The Lord
Chancellor, in the King's name, intervened and developed remedies for such injuries.

(b) Procedural Technicalities

The procedure in the common law courts was highly technical and many good causes of action
were lost due to procedural technicalities. For example, if A sued B because of the tresspass of B's
mare and in his writ A described the mare as a stallion, the action would be automatically
dismissed. This led to the urgent craving for a new system of procedure that would dispense justice
without undue regard to technicalities.

(c) Delays
Certain standard defences known as "essoins" caused considerable delay before a case could be
heard. For example, the hearing of a case could be automatically postponed for a year and a day if
the defendant pleaded sickness as a defence even though the court had not verified the truth of the
defence. The Lord Chancellor generally disallowed these defences and adopted the maxim "delay
defeats equity"

(d) Inadequate remedies

 The only remedy available at common law for a civil wrong was financial compensation called
damages. This might not be adequate compensation in such cases as breach of contract to sell a
piece of land. However, a common law court could not order the defendant to convey the land to
the plaintiff. The Lord Chancellor intervened and developed the remedy of "specific performance"
for such cases. The Chancellor, in the King's name would order the defendant to convey the land to
the plaintiff.

(e) Non-recognition of trusts

The common law did not recognize "trusts". For example if A conveyed property to B "on trust"
for C the common law courts could not compel B to use the income from the property for the
benefit of C. The Lord Chancellor intervened in such cases and the overall effect of the
intervention was the development of the body of principles and rules which constitute the basis of
the current Law of Trusts. In particular, the Court of Chancery would compel B to use the income
from the "trust property" for the benefit of C.

It should be noted that equity is "a gloss upon the common law". It was developed to supplement
the common law but not to supplant it. It does this by, as it were, filling in the gaps left by the
common law and, where appropriate, providing alternative remedies to litigants for whom the
remedies available at common law are inadequate.

However, the substance of common law and the doctrines of equity are applicable in Kenya only if
the circumstances of Kenya and its inhabitants permit and subject to such qualifications or
modifications as those circumstances may render necessary.

The English Judicature Act 1873 provided that if there is any conflict between common law and
equity, equity is to prevail. However, there is no Kenya statute to that effect. But since the Act
appears to be a statute of general application which was in force in England on 12th August, 1897 it
is prima facie applicable to Kenya. If so, any conflict between a rule of common law and a doctrine
of equity that arises in a Kenya Court would be resolved by applying the doctrines of equity.

Inadequate protection of borrowers

Rigidity or inflexibility

Contributions of Equity

(i) Developed the so called maxims of equity

(ii) Provided additional remedies
(iii) Provided for the discovery of documents
(iv) Enhanced the protection of borrowers.
(v) Recognized the trust relationship

AFRICAN CUSTOMARY LAW

African customary law may be described as the law based on the customs of the ethnic groups which
constitute Kenya's indigenous population. Section 3(2) of the Judicature Act 1967 provides that the High
Court, the Court of Appeal and all subordinate courts shall be guided by African customary law in civil
cases in which one or more of the parties is subject to it or affected by it, so far as it is applicable and is
not repugnant to justice and morality or inconsistent with any written law.

These provisions of the Judicature Act may be explained as follows:

(a) Guide
 The courts are to be "guided" by African customary law. This provision gives a judge discretion
whether to allow a particular rule of customary law to operate or not. The judge is not bound by
any rule of customary law and may therefore refuse to apply it if, for example, he feels that it is
repugnant to justice or morality.

(b) Civil Case

Customary law is applicable only in civil cases. The District Magistrate's Court's Act 1967, S.2
restricts the civil cases to which African customary law may be applied to claims involving any of
the following matters only:

(i) land held under customary tenure;

(ii) marriage, divorce, maintenance or dowry;

(iii) seduction or pregnancy of an unmarried woman or girl;

(iv) enticement of, or adultery with, a married woman;

(v) matters affecting status, particularly the status of women, widows and children, including
guardian-ship, custody, adoption and legitimacy;

(vi) intestate succession and administration of intestate estates, so far as it is not governed by any
written law.

In KAMANZA CHIWAYA v TSUMA (unreported High Court Civil Appeal No.6 of 1970)
the High Court held that the above list of claims under customary law was exhaustive and
excludes claims in tort or contract.

(c) Subject to it or affected it

One of the parties must be subject to it or affected by it. If the plaintiff and the defendant belong to
the same ethnic group, they may be said to be "subject" to the customs of that ethnic group which
could then be applied to settle the dispute. For example, a dispute between Kikuyus relating to any
of the matters listed in (b) above cannot be settled under Kamba, Luo or any other customary law
except Kikuyu customary law.

However, if there is a dispute involving parties from different ethnic groups it may be determined
according to the customs of either party, since the other party would be "affected" by the custom.

(d) Repugnance to justice and morality

The customary law will be applied only if it is not repugnant to justice and morality.

Although the Act uses the phrase "and" in relation to "justice and morality", it appears that "or",
rather than "and", was intended.

In MARIA GISESE ANGOI v MACELLA NYOMENDA (see Civil Appeal No.1 of 1981 being
the judgement of Aganyanya J. delivered at Kisii on 24-5-1982) the High Court held that Kisii
customary law which allows a widow who has no children or who only has female children to enter
into an arrangement with a girl's parents and take the girl to be her wife and then to choose a man
from amongst her late husband's clan who will be fathering children for her (i.e. the widow), was
repugnant to justice because it denied the alleged wife the opportunity of freely choosing her
partner.

The Court refused to follow the custom and declared that there had been no marriage between the
appellant and the respondent.
 A rule of customary law that might be declared to be repugnant to morality is the Masai custom that
a husband returning home and finding an age-mate's spear stuck at the entrance to his hut, as a
means of informing him that the owner of the spear is at the moment having an affair with his wife
and he should not interrupt. The husband cannot take divorce proceedings under Masai customs
against his wife for adultery. In the event of such a declaration, a Masai man would be able to
petition the court for divorce on the ground of the wife's adultery at common law.

Consistent with the written Law

Islamic law is the law based on the Holy Koran and the teachings of the Prophet Mohammed as
explained in his Sayings called "Hadith".

Islamic law is applicable in Kenya under section 5 of the Kadhi's Courts Act 1967 when it is necessary to
determine questions of Muslim Law relating to personal status, marriage, divorce or inheritance in
proceedings in which all the parties profess the muslim religion.

HINDU LAW

Hindu customary rites are applicable under S.5 of the Hindu Marriage and Divorce Act, 1960. S.2 of the
Act defines a "custom" as "a rule which, having been continuously observed for a long time, has attained
the force of law among a community, group or family, being a rule that is certain and not unreasonable,
or opposed to public policy; and, in the case of a rule applicable only to a family, has not been
discontinued by the family". Hindu customary rites are a source of Kenya law only for purposes of
solemnizing Hindu marriages.

ADMINISTRATION OF THE LAW

THE KENYA JUDICIAL SYSTEM

The current Kenya judicial system is organized in the form of a pyramid, with the Court of Appeal at the
apex, the High Court immediately below it and then the subordinate courts consisting of the Kadhi's
Court, Resident Magistrate's Court, District Magistrate's Court and the Court Martial. This structure of
the courts is based on the Constitution, the Magistrate's Courts Act 1967 and the Kadhi's Courts Act
1967.

The structure of the Kenya courts may be explained with the aid of the following diagram:

The arrows point at the court to which an appeal lies from a lower court.
THE COURT OF APPEAL

Establishment
The Court of Appeal was established on 28th October, 1977 by Section 64(1) of the constitution which
states that 'there shall be a Court of Appeal which shall be a superior court of record'.

Composition
S.64 (2) of the Constitution states that 'the judges of the Court of Appeal shall be the Chief Justice and
such number, not being less than two, of the judges of appeal ... as may be prescribed by Parliament'.
The Judicature Act, 1967, s.7(2), as amended by the Statute Law (Miscellaneous Amendments) Act,
1986 provides that the number of judges of appeal shall be eight.

Jurisdiction
S.64 (1) of the Constitution provides that the Court of Appeal 'shall have such jurisdiction and powers in
relation to appeals from the High Court as may be conferred on it by law'.

The Appellate Jurisdiction Act 1977, S.3(1) provides that 'the Court of Appeal shall have jurisdiction to
hear and determine appellas from the High Court in cases in which an appeal lies to the Court of Appeal
under any law'. Section 3(3) of the Act further provides that in the hearing of an appeal in exercise of the
jurisdiction conferred by the Act, the law to be applied shall be the law applicable to the case while it
was being heard in the High Court.

Procedure
The practice and procedure of the Court of Appeal are regulated by Rules of Court made by the Rules
Committee constituted under the Appellate Jurisdiction Act. However, S.5(3) (1) of the Act provides
that an uneven number of at least three judges shall sit for the final determination of an appeal other than
the summary dismissal of an appeal. Where more than one judge sits for the determination by the court
on any matter (whether final or otherwise), the decision of the court shall be according to the opinion of a
majority of the judges who sat for the purpose of determining that matter.

The Court of Appeal has no original jurisdiction and hears appeals from the High Court only.

THE HIGH COURT

Establishment
The High Court is established by S.60 (1) of the Constitution which states that 'there shall be a High
Court, which shall be a superior court of record'.

Composition
Section 60(2) of the Constitution provides that the judges of the High Court shall be the Chief Justice
and such number, not being less than thirty-two, of other judges as may be prescribed by Parliament.

Under S.61 of the Constitution, the Chief Justice is to be appointed by the President while the other
judges (known as "puisne judges") are appointed by the President acting in accordance with the advice of
the Judicial Service Commission.

Jurisdiction
Section 60 of the constitution states that the High Court shall have 'unlimited original jurisdiction in civil
and criminal matters and such other jurisdiction and powers as may be conferred on it by the constitution
or any other law'. Although the jurisdiction of the High Court is unlimited it will in practice only serve
as a trial court for civil cases in which the amount claimed is more than Shs.300,000 and cannot
therefore be heard in any Resident Magistrate's Court.

(a) Interpretation of Constitution

Section 67(1) of the Constitution provides that where any question as to the interpretation of the
constitution arises in any proceedings in any subordinate court, and the court is of the opinion that
the question involves a substantial question of law, the court may, and shall if any party to the
proceedings so requests, refer the question to the High Court. For purposes of determining the
question referred, it shall be composed of an uneven number of judges, not being less than three.

The decision of the High Court binds the Court that referred the question to the High Court and it
must dispose the case in accordance with the High Court's decision.

(b) Supervisory Jurisdiction

The High Court has jurisdiction under S.65 (2) of the Constitution to supervise any civil or criminal
proceedings before any magistrate's court or court-martial and can make such orders, issue such
writs and give such directions as it may consider appropriate for the purposes of ensuring that
justice is duly administered by such court.

(c) Admiralty Jurisdiction

The High Court is constituted a court of admiralty by S.4 of the Judicature Act for the purpose of
exercising 'admiralty jurisdiction in all matters arising on the high seas or in territorial waters, or
upon any lake or other navigable inland waters in Kenya'. The law applicable to such cases is the
Admiralty of England as well as 'international Laws and the comity of nations'.

(d) Presidential and Parliamentary election petitions.

(e) Enforcement of fundamental rights and freedoms

RESIDENT MAGISTRATE'S COURT

Establishment
The Resident Magistrate's Court is constituted by S.3 (1) of the Magistrate's Courts Act which provides
that 'there is hereby established the Resident Magistrate's Court, which shall be a court subordinate to the
High Court and shall be duly constituted when held by a Chief Magistrate, a Senior Principal Magistrate,
a Principal Magistrate, a Senior Resident Magistrate or a Resident Magistrate'.

Civil Jurisdiction
The civil jurisdiction of the Resident Magistrate's Court was increased by the Statute Law
(Miscellaneous Amendments) Acts of 1983, 1986 and 1991 and is as follows:

Court Jurisdiction
Court Held by a chief Magistrate, a Senior Value of subject matter does not
Principal Magistrate, Principal Magistrate exceed Shs. 50,000/-.
No jurisdiction

or a Senior Resident Magistrate under African customary law

Court Held by a Resident Magistrate Value of subject matter does not

exceed
Shs.25,000/-
Has unlimited Subject-matter
jurisdiction in claims based on
African Customary law
The Chief Justice is empowered, by notice in the Gazette, to increase the limit of jurisdiction of:

(a) a Chief Magistrate or Senior Principal Magistrate to a sum not exceeding50000/=; and

(b) a Principal Magistrate, Senior Resident Magistrate or to a sum not exceeding300,000/=

(c) Resident Magistrate not exceeding Ksh 75,000/=

Criminal Jurisdiction
The Criminal Procedure Code, as amended by the Statute Law (Miscellaneous Amendments) Act 1986,
provides that a subordinate court held by a Chief Magistrate, a Senior Principal Magistrate Principal
Magistrate or Senior Resident Magistrate may pass any sentence authorised by law for an offence triable
by that court.
DISTRICT MAGISTRATE'S COURT

Establishment
District Magistrate's Courts are established for each district in Kenya by S.7(1) of the Magistrate's Courts
Act 1967.

Constitution
Section 7(1) of the Act provides that a district magistrate's court 'shall be duly constituted when held by a
district magistrate who has been assigned to the district in question by the Judicial Service Commission'.

Territorial Jurisdiction
Section 7(3) of the Act provides that 'a district magistrate's court shall have jurisdiction throughout the
district in respect of which it is established'. However, the Chief Justice may, by notice in the Gazette,
extend the areas of jurisdiction of a district magistrate by designating any two or more districts a joint
district.
Criminal Jurisdiction
The Statute Law (Miscellaneous Amendments) Act 1983 amended the criminal jurisdiction of the district
magistrate's courts and imposed the following new limits:

Class Imprisonment Fine Strokes

First Class 7 years Shs.20,000 24

Second Class 2 years Shs.10,000 12
Third Class 1 year Shs. 5,000 6

The criminal jurisdiction of any magistrate may be increased by the Judicial Service Commission by
notice in the Gazette.

Criminal Appeal
Section 10(1) of the Magistrate's Courts Act provides that any person who is convicted of an offence on
a trial held by a magistrate's court of the third class may within fourteen days appeal against his
conviction or sentence, or both, to the Resident Magistrate's Court. There is no right of appeal for a
person who pleaded guilty and was convicted on the plea, except as to the legality or extent of the
sentence. Where a person charged with an offence has been acquitted the Attorney General may appeal
against the acquittal.

Civil Jurisdiction
The civil jurisdiction of the district magistrate's courts in claims not under customary law was changed
by the Statute Law (Miscellaneous Amendments) Act 1983 and are as follows:

District Magistrate Maximum Claim

First Class Shs.10,000

Second Class Shs. 5,000
Third Class Shs. 5,000

There is no limit on the amount if the proceedings concern a claim under customary law.

Civil Appeals
S.11 (1) of the Magistrate's Court Act provides that 'any person who is aggrieved by an order of a
magistrate's court of the third class made in proceedings of a civil nature may appeal against the order to
a magistrate's court of the first class'. The appeal must be made within twenty-eight days after the date
of order appealed against.

KADHI'S COURT

Establishment
The Kadhi's Courts Act, 1967, S.4 (1) as amended by the Statute Law (Miscellaneous Amendments) Act
1986 provides that "in pursuance of section 66(3) of the Constitution there shall be established such
number of Kadhi's Courts as the Chief Justice may, in consultation with the Chief Kadhi, determine".

Territoral Jurisdiction
The Kadhi's Courts Act, S.4 (2) provides that the Kadhi's court shall have jurisdiction as follows:

1. Three courts each have jurisdiction within Kwale District, Mombasa District, Kilifi District and
Lamu District.
2. One court each have jurisdiction within Nyanza Province, Western Province, West Pokot District,
Trans Nzoia District, Elgeyo Marakwet District, Laikipia District, Baringo District, Uasin Gishu
District, Kericho District, Nakuru District and Nandi District.

3. One court has jurisdiction within Wajir District and Mndera District.

4. One court has jurisdiction within the Nairobi area and the Central and Eastern Provinces (except
Marsabit and Isiolo District).

5. One court has jurisdiction in Garrisa District and Tana River District.

6. One court has jurisdiction in Marsabit District and Isiolo District.

This makes a total of eight Kadhi's courts.

Civil Jurisdiction
Section 65(1) of the Constitution states that 'the jurisdiction of a Kadhi's court shall extend to the
determination of questions of Muslim law relating to personal status, marriage, divorce or inheritance in
proceedings in which all the parties profess the Muslim religion."

Criminal Jurisdiction
Kadhi's Courts have no criminal jurisdiction.

COURT-MARTIAL

Establishment
Section 65 (1) of the Constitution empowers Parliament to establish court martial which shall have such
jurisdiction and powers as may be conferred by any law. Pursuant to this provision, the Armed Forces
Act, S.85 (1) provides that 'a court-martial may be convened by the Chief of General Staff or by the
Commander'. The court-martial is not a permanent court but is convened from time to time to try any
person who has committed an offence which, under the Section 84 of the Armed Forces Act, is triable by
a court martial. The court is dissolved as soon as the trial is over.

Appeals
Section 115 of the Armed Forces Act allows a person who has been convicted by a court-martial to
appeal to the High Court either against the conviction, sentence or both. The Attorney General may also
appeal to the High Court within forty days of an acquittal.

S.115 (3) of the Act states that the decision of the High Court on any appeal under the Act shall be final
and shall not be subject to further appeal.

SPECIAL COURTS
In addition to the courts dealt with in paragraphs 2.1 - 2.7 above, there exist in Kenya a number of other
institutions which are called "courts" or "tribunals", but which do not form part of the Kenya judicial
system. They are called "courts" because they exercise judicial or quasi-judicial powers by hearing
particular types of disputes or cases. Technically, however, these institutions are not courts because they
do not administer the law. For example, when a trade union refers a dispute between its members and
their employers to the Industrial Court, the Court will settle the dispute by following a procedure which
approximates to the procedure followed in a court of law. This is done primarily as a means of ensuring
that each of the parties to the dispute will be satisfied that it has been given a fair opportunity to present
its case. However, if the court decides to award a salary increase for the employees, it would not be
applying, or administering, a rule of law. This is so because there is no legal rule which contains, or
provides a mechanism for determining, the salary scales for any class of workers in Kenya.
Additionally, the decision cannot be challenged by recourse to the appellate jurisdiction of any of the
courts within the judicial system. The major examples of such tribunals are:

(i) The Industrial Court;

(ii) The Rent Tribunal, and

(iii) The Business Premises Rent Tribunal.

CASE LAW AND JUDICIAL PRECEDENT

"Case law" may be described as the method or way of learning law "through the cases". By studying a
particular case and the decision therein, we get to know the legal rules relating to the factual situation of
the case. The more cases we learn the more we are "learning the law".

THE DOCTRINE OF "STARE DECISIS" OR JUDICIAL PRECEDENT

The doctrine of "stare decisis" or "judicial precedent" is a legal rule that requires a judge to refer to
earlier cases decided by his predecessors in order to find out if the material facts of any of those cases
are similar to the material facts of the case before him and, in the event of such a finding, to decide the
case before him in the same way as the earlier case had been decided. In this way, the earlier decision
"stays" or "stands" as it was made.

The doctrine has been described as the "sacred principle" of English law. It was developed by the
English courts as a mechanism for the administration of justice which would enable judges to make
decisions in an objective or standard manner instead of subjectively and in a personalised manner.

“RATIO DECIDENDI”

The “ratio decidendi” of a case consists of the material facts of the case and the decision made by the
judge on the basis of those facts. The material facts become, as it were, the basis or "rationale" (ratio)
upon which the judge is to decide (decidendi) the case. They constitute, in ordinary parlance, the
reason, or ground, of the judge's decision and ensure that the decision-making process is a rational one.
The ratio decidendi of a decided case constitutes the legal rule, or principle, for the decision of future
cases with similar material facts. In other words, the decision is a precedent to be followed when
deciding such cases.

TYPES OF PRECEDENTS

A precedent may be:

(a) An binding precedent the judge must follow whether he approves of it or not. It is binding upon
him and excludes his judicial discretion for the future. These, generally speaking, are decisions of
higher courts.
(b) A persuasive precedent if it is one which the judge is under no obligation to follow but may
however take into consideration, or follow, in the course of considering his intended decision.
These, generally speaking, are decisions of lower courts and the decisions of superior courts in the
Commonwealth.

A precedent may also be classified as:

(i) An original precedent if it is one which creates and applies a new legal rule; or

(ii) A declaratory precedent if it is one which does not create a new legal rule but merely applies an
existing legal principle.

The latter classification is a technical one which does not fall within Hale's definition of a
"declaratory precedent". According to Hale, "the decisions of courts of justice (in England)... do
not make a law properly so-called: for that only the King and Parliament can do; yet they have a
great weight and authority in expounding, declaring, and publishing what the law is".

Salmond however contends that "both at law and in equity, however, the declaratory theory (as
formulated by Hale) must be totally rejected if we are to attain to any sound analysis and
explanation of the true operation of judicial decisions. We must admit openly that precedents
make law as well as declare it. We must admit further that this effect is not merely accidental and
indirect, the result of judicial error in the interpretation and authoritative declaration of the law.
Doubtless judges have many times altered the law while endeavouring in good faith to declare it.
But we must recognise a distinct law-creating power vested in them and openly and lawfully
exercised. Original precedents are the outcome of the intentional exercise by the courts of their
priviledge of developing the law at the same time that they administer it".

OBITER DICTUM

A "by the way" statement made by a judge before delivering his judgement with a view to re-enforcing
or strengthening his reasons for the decision that he will make is known as "the obiter dictum" of the
case. If more than one such statements are made, they are known as obiter dicta. An obiter dictum is
defined by Osborne's Concise Law Dictionary as "an observation by a judge on a legal question
suggested by a case before him, but not arising in such a manner as to require decision".

Although an obiter dictum does not constitute a legal rule for the decision of future cases it may
constitute a "persuasive precedent" for a relevant later case. In other words, it may be used by an
advocate to "persuade" a judge hearing a case to accept as a legal rule the view it expresses.

Writing on the authority of precedent Salmond has stated as follows:

"The importance of judicial precedent has always been a distinguishing characteristic of English law.
The great body of the common or unwritten law is almost entirely the product of decided cases,
accumulated in an immense series of reports extending backwards with scarcely a break to the reign of
Edward the first at the close of the thirteenth century. Orthodox legal theory, indeed, long professed to
regard the common law as customary law, and judicial decisions as merely evidence of customs and of
the law derived therefrom. This was never much better than an admitted fiction. In practice, if not in
theory, the common law of England has been created by the decisions of English judges. Neither Roman
law, however, nor any of those modern systems which are founded upon it, allows such a degree of
authority to precedent. They see no difference of kind between precedent and any other expression of
expert legal opinion. A book of reports and a text-book are in the same legal category. They are both
evidences of the law; they are both instruments for the persuasion of judges; but neither of them is
anything more. English law, on the other hand, draws a sharp distinction between them. A judicial
precedent speaks in England with authority; it is not merely evidence of the law but a source of it; and
the courts are bound to follow the law that is so established. It seems clear that we must attribute this
feature of English law to the peculiarly powerful and authoritative position which has been at all times
occupied by English judges. From the earliest times the judges of the King's courts have been a small
and compact body of legal experts. They have worked together in harmony, imposing their own views
of law and justice upon the whole realm, and establishing thereby a single homogeneous system of
common law. Of this system they were the creators and authoritative interpreters, and they did their
work with little interference either from local custom or from legislation. The centralisation and
concentration of the administration of justice in the royal courts gave to the royal judges a power and
prestige which would have been unattainable in any other system. The authority of precedents was great
in England because of the power, the skill, and the professional reputation of the judges who made them.
In England the bench has always given law to the bar; in Rome it was the other way about, for in Rome
there was no permanent body of professional judges capable of doing the work that has been done for
centuries in England by the royal courts".

STARE DECISIS AND ITS APPLICATION BY THE KENYA COURTS

There is so far no case decided by the Kenya Court of Appeal regarding the application of "stare decisis"
by Kenya Courts. What we have are the rules which were formulated in 1970 by the then Court of
Appeal for East Africa at the time that it was also the Court of Appeal for Kenya. However, it can be
assumed that the rules which the Court of Appeal for East Africa laid down for Kenya Courts in Dodhia
v. National & Grindlays Bank are still binding on the Kenya Courts (with the probable exception of the
Kenya Court of Appeal)

These rules are:

(i) Subordinate courts are bound by the decisions of superior courts.

To understand the full implications of this statement you should have the diagram of the Kenya
courts in front of you.

(ii) A subordinate court of appeal should be bound by a previous decision of its own.

Subordinate courts of appeal are the High Court, Resident Magistrate's Court, Senior Resident
Magistrate's Court, Principal Magistrate's Court, Senior Principal Magistrate's Court, the Chief
Magistrate's Court and the First Class District Magistrate's Court. These courts are "subordinate"
because they have higher courts above them. However, they are "courts of appeal" because they
hear appeals from the courts below them.

(iii) As a matter of judicial policy, the final court of appeal, while it would normally regard a previous
decision of its own as binding, should be free in both civil and criminal cases to depart from such a
previous decision when it appears right to do so.
Regarding point (i) above, the court did not clarify whether a subordinate court would be free to depart
from a decision of a higher court because it appeared to be in conflict with a decision of a still higher
court. For example, can a Resident Magistrate's Court refuse to follow a decision of the High Court
because it appears to be in conflict with a decision of the Court of Appeal? However, in MILIANGOS v
GEORGE FRANK (TEXTILES) LTD, the House of Lords stated that 'it is the duty of a subordinate
court to give credence and effect to the decision of the immediately higher court, notwithstanding that it
may appear to conflict with a decision of a still higher court. The decision of the still higher court must
be assumed to have been correctly distinguished (or otherwise interpreted) in the decision of the
immediately higher court'. The Kenya Court of Appeal might adopt this rule when it ultimately becomes
necessary to decide the point.

Regarding point (iii) above, the Court of Appeal for East Africa explained in Dodhia's case that a final
court of appeal (such as the Kenya Court of Appeal) should be free to depart from an earlier decision of
its own:

(a) Erroneous or improper conviction

in criminal cases, if following the earlier decision would result in an improper conviction;

(b) Changes in circumstances

if there have been rapid changes in the customs, habits and needs of the people, since the earlier
case was decided, so that these changes should be reflected in the decision of the final court of
appeal, and

(c) Per incurriam rule

if it is satisfied that the earlier decision was given "per incuriam". The court did not however
explain what would constitute a "per incuriam" decision. However, in MILIANGOS v GEORGE
FRANK (TEXTILES) LTD the English House of Lords stated that a decision is only per incuriam
where:

(i) the judgment was given in inadvertence to some authority (judge-made, statutory or
regulatory) apparently binding in the court giving such judgment, and

(ii) if the court giving such judgment had been advertent to such authority, it would have decided
otherwise than it did (i.e. it would, in fact, have applied the authority).

(d) Distinguishing the earlier decision

(e) Ratio decidendi of earlier decision is too wide or obscure.

(f) Earlier decision has been overruled by statute

(g) Ratio decidendi is in conflict with a fundamental principle of law.

(h) Ratio decidendi is one of the many conflicting decision of a court of Co-ordinate
jurisdiction.

In BAKER v In BAKER THE QUEEN Lord Diplock stated:

"Strictly speaking the per incuriam rule as such, while it justifies a court which is bound by a precedent
in refusing to follow one of its own previous decisions, does not apply to decisions of courts of
appellate jurisdiction superior to that of a court in which the rule is sought to be invoked. To permit this
use of the per incuriam rule would open the door to disregard of precedent by the court of inferior
jurisdiction by the simple device of holding that decisions of superior courts with which it disagreed
must have given per incuriam". This means, for example, that a Resident Magistrate's Court cannot
refuse to follow a decision of the High Court on the ground that such decision was made per incuriam
(i.e. in inadvertence to a decision of the Court of Appeal).
Any court can depart from a previous decision of its own if the decision was made per incuriam.

ADVANTAGES AND DISADVANTAGES OF STARE DECISIS

The main advantages and disadvantages of the doctrine of stare decisis are:

1. Advantages
(i) Certainty and Predictability
The doctrine of stare decisis introduces an element of certainty and uniformity in the
administration of justice. In DODHIA V NATIONAL AND GRINDLAYS BANK the then
Court of Appeal for East Africa expressed the view that the administration of justice requires
an element of certainty and uniformity which would not be possible if judges were free to
make decisions without regard to earlier decisions.

(ii) Flexibility
Because of the freedom that the final Court of Appeal usually has to depart from a previous
decision of its own if the social conditions that necessitated such decision no longer exist, there
is flexibility in the administration of the law as human societies grow and become more
complex. This point was particularly emphasized by the then Court of Appeal for East Africa
in Dodhia v National and Grindlays Bank.

(iii) Aptitude for growth

The process of 'distinguishing' cases facilitates the growth of detailed legal principles to deal
with different factual situations. This would probably not be possible in a purely enacted
system of law.

A case is 'distinguished' if a judge points out the difference in the material facts of an earlier
case and the case before him for decision, as the basis for arriving at a different decision.

(iv) Practicality
The case law method has enabled judges to adopt a practical approach to legal problems since
such problems have arisen from the practical situations in which the litigants have found
themselves. This practical approach has also enabled judges to make decisions only after
being satisfied that the particular decision would not create practical problems for the people
subject to the law. An example is the refusal of the court in Pharmaceutical Society v Boots to
regard the display of goods in a shop-window as an offer to sell them at the indicated prices.
Such a decision would have had the inconvenient consequence that customers would
henceforth lose freedom to pick and replace various items before ultimately presenting them to
the cashier, contrary to what was actually happening in practice.

(v) Rich in detail

(vi) Consistency and uniformity

2. Disadvantages
(i) Rigidity
The case law method of administration of justice has been criticized on the grounds that it
leads to rigidity, since the discretion of a judge is usually restricted by the rule that he must
follow the decision of his predecessors if the material facts of the case to be decided are the
same as those of an earlier case.

(ii) Over-subtlety/Artificiality
 Because a judge is forced, as it were, to follow an earlier case which his conscience may
preclude him from following, he might be inclined to 'distinguish' the present case from the
earlier case. This artificial 'distinguishing' sometimes creates artificial differences which make
case law over-subtle.

(iii) Bulk and Complexity

Because so many cases are being decided everyday by courts all over the country, case law has
become bulky and complex and it is doubtful whether judges would really know if a relevant
earlier case had been decided, say some ten years ago.

(iv) Piece-meal
Rules of law are made in bits and pieces

THE LEGAL PROFESSION

Magistrates
A magistrate is an advocate who is appointed by the Judicial Service Commission to the post of -

(a) District Magistrate, or

(b) Resident Magistrate.

With the passage of time, he may be promoted to the rank of:

• Senior Resident Magistrate,
• Principal Magistrate,
• Senior Principal Magistrate, or
• Chief Magistrate.

Due to historical reasons, a substantial number of the current District Magistrates are "lay magistrates'
who are neither law graduates nor advocates. However, this situation is likely to be reversed in the near
future following the implementation in 1993 of a new scheme of service for Magistrates and Judges.

Judges
Generally speaking, judges of the High Court of Kenya are appointed from among advocates of at least
seven years' standing (i.e. those advocates who have been in private practice for at least seven years).
They are called "puisne judges".

All judges are appointed by the president in accordance with the advice of the Judicial Service
Commission.

Their appointment is already explained in paragraph 1.8.3

Qualifications
To qualify for appointment as a judge of the High Court a person must either be:
(a) an advocate of the High Court or
(b) be or have been a judge of a court with unlimited jurisdiction in civil and criminal matters in some
part of the common Wealth or Republic of Ireland.
(c) Or have been a judge of a court with jurisdiction to hear appeals from a court with unlimited
jurisdiction in criminal and civil matters in some part of the common Wealth or Republic of Ireland.

Under section 63 of the Constitution a judge must take and subscribe the oath of allegiance and any oath
as may be prescribed by Parliament, before taking duties. All judges retire at the age of 74 and enjoy
some security of tenure of office.
Under the Constitution a judge can only be removed from office on the ground of
1. Misbehaviour or,
2. Inability to discharge the functions of his office.

Provided a tribunal appointed by the President has investigated the allegations as a mere of fact and
recommended that the judge is suspended from office, but such suspension ceases to have any effect
if the tribunal recommends the judge to remain in office. However, the suspension becomes permanent
if the tribunal recommends that the judge be removed from the office.

Judges of Appeal
A "judge of appeal" is a judge who is appointed to the Court of Appeal, as explained in paragraph 1.8.3.

Attorney - General
The Office of Attorney - General is constituted by S.26 (1) of the constitution which provides that "there
shall be an Attorney - General whose office shall be an office in the public service". S.26 (2) of the
constitution provides that he "shall be the principal legal advisor to the Government of Kenya". It is
however interesting to note that the constitution does not prescribe the qualifications for appointment as
Attorney -General.

Registrar of the High Court

The Registrar of the High Court is the administrative head of the High Court. He is assisted in his duties
by the Deputy Registrar of the High Court.

THE CHIEF JUSTICE

The office of the Chief Justice is created by the constitution

Appointment
Under section 61 of the Constitution the Chief Justice is appointed by the President.

Functions
(a) Administrative Function
• He is the principal administrative officer of the judiciary
• He is the chairman of the Judicial Service Commission
• He determines where the High court sits
• He appoints the duty judge
• Assigns cases to judges
• He is in charge of discipline

(b) Judicial Function

As a judge of the High Court and court of Appeal he participates in the adjudicatory process.

(c) Legislative Function

The chief justice exercises delegated legislative power. He is empowered to make law to facilitate
the administration of Justice. Under the Kadhi’s Court Act, Judicature Act and the Magistrate
Court Act he is empowered to make rules to regulate administration of justice in subordinate courts.

Under sec 84 of the constitution he is empowered to make rules to facilitate the enforcement of
fundamental rights and freedoms of the individual.

(d) Political function

The chief justice administers the presidential oath to the person who is elected as president. He
represents the judiciary in all state functions.
(e) Legal education and profession
• The chief justice is the chairman of the council of legal education.
• He admits advocates to the ban.
 • He issues practicing certificates to advocates.
• He appoints commissioners for oath and Notaries Public.

(f) Enhancement of Jurisdiction of Magistrates

Under the provisions of the magistrate court the Chief Justice is empowered to enhance or increase
the civil jurisdiction of the Resident Magistrates Court.

HIGH COURT REGISTRARS

These are magistrates who in addition to judicial functions perform administrative duties. They are
appointed by the Judicial Service Commission. They are administrative and accounting officers. They
assist the Chief Justice in the administration of the judicial department and are answerable to the Chief
Justice. However the High Court Registrar is the custodian of the Roll of Advocates.

KADHI
The office of the chief Kadhi and Kadhi are created by sec 66(1) of the constitution. The chief Kadhi
and all Kadhis are appointed by the judicial service commission. To qualify for appointment one must:

(a) Profess Muslim faith.

(b) Possess such knowledge of Muslim law applicable to any sect of sects of Muslims which in the
opinion of the J S C qualify one for appointment.

Kadhis retire at 55 years.

They preside over Kadhis Courts only.

Attorney general
The office of the Attorney general is established by sec (i) of the constitution. It is an office in the public
service.

Appointment
Under sec 109 (i) the Attorney General is appointed by the president. To qualify for appointment one
must be an advocate of the High Court if not less than 5 years standing.

The Attorney General retires at such age as may be prescribed by the parliament. He enjoys the same
security of tenure of office. He can only be removed for incapacity of misbehaviour provided a tribunal
appointed by the president so recommends after investigation of the allegations.

Powers of the Attorney General

Under sec 26(3) the Attorney General is empowered to:

(a) Institute and undertake criminal proceedings against any person before any court other than a court
martial for any alleged offence.

(b) take over and continue any criminal proceedings instituted by any other person or body.

(c) Discontinue as any stage before judgement is delivered any criminal proceedings
instituted or undertaken by himself or any other person or body, by entering the so called Nolle
Prosecuice “I refuse to prosecute”

(d) order the commissioner of police to investigate any alleged or suspected criminal acts. The
commissioner must oblige and report to the Attorney General.
Functions
• Under sec 26( 2) the Attorney General is the principal legal adviser to the government of Kenya
• He occupies a ministerial post in the cabinet
• Must act independently in the discharge of his duties
• Drafts all government bills
• He is an ex-officio member of the National Assembly
• Represents the state in all cases
• He is a public prosecutor
• Most senior lawyer (head of the bar)
• Services legal needs of other government departments
• Member of the judicial service commission
• Member of the Advisory Committee on prerogative of mercy

Advocates
Under sec 3(1) of the Interpretation and General Provisions Act cap 2 and sec 2 of the Advocates Act
(1989) an advocate is a person whose name has been duly entered as an advocate in the Roll of
Advocate.

An advocate has also been defined as a person who has been admitted as such by the Chief Justice. The
law relating to Advocacy is contained in the Advocates Act.

Qualifications
To qualify for admission as an advocate one must
a. Be a Kenyan citizen
b. Possess a law degree from a recognized university
c. Satisfy the council of Legal Education Examination Requirements.

Procedure for Admission

• A person must make a formal petition to the chief justice through the registrar of high court.
• A copy of the petition must be delivered to the council of legal Education.
• A notice of the petition must also be given. The petition must be published in the Kenya Gazette.
• The petition is heard by the Chief Justice and subsequently the petitioner takes the oath of office
and signs the role of advocates.

To practise law one must have a practicing certificate.

Duties of an Advocate
• Duty to the Court
As an officer of the court an advocate is bound to assist in the administration of justice. He must
advice evidence, the law correctly each time he appears before the court.

• Duty to Client
He is bound to urge his clients’ case in the best manner possible. He owes a legal duty of care to
the client and is liable in damages for professional negligence.

• Duty to the Profession

He is bound to maintain the highest possible standard of conduct and integrity by obedience to the
law and ethics of the profession.

• Duty to the Society

 As a member of the society he is bound to take part in its social and political and economic
development.

THE LAW SOCIETY OF KENYA

Establishment
It is established by sec 3 of the Law Society of Kenya Act Cap 18. It is a body corporate by the name
Law Society of Kenya with perpetual succession, common seal, with power to sue and be sued in its
name.

Membership
It consists of
i) Advocates
ii) Special membership and honorary membership

The affairs of the society are managed by a council elected by the advocates.

Objects of the Law Society

Under sec 4 of the Act the object of the society as established are;
a. To maintain and improve the standards of conduct and learning of the legal profession in Kenya.
b. To facilitate acquisition of legal knowledge by embers of the legal profession and others.
c. To assist the government and the courts in all matters affecting legislation and administration of law
in Kenya.
d. To represent, protect and assist members of the legal profession in respect of the conditions
overactive and otherwise
e. To protect and assist the public in all matters touching or incidental to law
f. To acquire hold, develop or dispose of moveable or immovable property
g. To raise or borrow money for its objectives
h. To invest and deal with monies of the society
i. To do all other things incidents to or conclusive to the attainment of its objects.

Arbitration
This is a dispute resolution mechanism where by disputes are settled out of court by arbitral tribunals or
arbitrators who make arbitral words as opposed to judgement. The law relating to arbitration in Kenya is
contained in the Arbitration act 1995. This act repealed the Arbitration Act cap 49. The Act applies to
both domestic and international arbitration.

Under sec 3(1) of the Act an Arbitration Agreement is an agreement by parties to submit to arbitration all
or certain disputes arising between them. An arbitral tribunal means a sole arbitrator or a panel thereof.
An arbitration agreement may take the form of clause in the contract or a separate agreement between the
parties.

Methods of Reference to Arbitration

A dispute may be referred to arbitration by:

• The parties in accordance with the agreement

• The court if the parties to the case so consent
• By statute where a dispute has arisen there under

Advantages of Arbitration
(a) Speed: It is a faster method of dispute resolution

(b) Convenient: Parties are free to determine

i. The number of arbitrators
 ii. Venue of proceedings
iii. Language to use
iv. Law applicable

(c) Informality: Arbitral proceedings are free from legal formalities which characterize the courts
of law. They are less technical in approach.

(d) Expertise and specialization: The parties to the dispute have an opportunity to appoint the
most qualified or specialized person to determine their dispute.

(e) Cheap: It costs less to see a dispute through arbitration

(f) Privacy: Arbitral proceedings are conducted in private, free from undue publicity

(g) Flexibility: Arbitral tribunals are not bound by previous awards. This provides room for
exploration.

(h) User friendly/less acrimonious: Arbitration is less acrimonious and tunes down enmity
between the parties.

Disadvantages of Arbitration
(a) Arbitral awards have no precedential value, like they cannot be relied on in subsequent
proceedings
(b) Arbitration s characterized by the danger of the likelihood of miscarriage of justice particularly
where the arbitrator is not a legal expert
(c) Arbitrators exercise unregulated discretion and hence the danger of abuse of power
(d) Arbitrators are more susceptible to manipulation than judges and magistrates
(e) The fact that proceedings are conducted in private may raise suspicion.

Appointment of Arbitrators

Under sec 12(1) the parties are free to agree on the procedure of appointing arbitrators.

Under sec 31(1) the parties are free to determine the number of arbitrators

Arbitrators may be appointed by

(a) The parties to the dispute
(b) A third party or body appointed by the parties
(c) High Court upon application in the following circumstances
• Where the parties fail to agree as to who to appoint as the arbitrator
• Where either party has failed to appoint its arbitrator within thirty days of a receipt of a
request by the other party to do so.
• Where the two arbitrators appointed fail to appoint a third

Once appointed an arbitrator must enter upon its duties with reasonable dispatch. However he may be
removed from the office;
➢ For inability to perform
➢ Failure to act without undue delay

However, the arbitrator is free to withdraw from office.

POWERS OF THE ARBITRAL TRIBUNAL

(a) To determine whether it has jurisdiction to entertain a dispute
(b) To provide interim remedies, at the request of either parties
(c) To require either parties to provide security
(d) To determine the admissibility of evidence
(e) To appoint experts on specific issues of the dispute etc.

The Arbitral Award

The decision of an arbitral tribunal is referred to as an arbitral award. Where the terms of employment so
require the arbitrator must make an interim award. However, in all cases he must make a final award
which must be written and signed by all arbitrators. It must state the reasons of the decisions and the
date of place of its making.
A copy of the award must be delivered to each party.

Termination of Arbitral Proceeding

Arbitral proceedings may be terminated in any of the following ways
a. By the final award of the arbitrator
b. If the claimant withdraws the case
c. If the parties mutually agree
d. By the arbitrators order

CHALLENGING AN ARBITRAL AWARD

A party dissatisfied by an arbitral award any challenge it in the High Court and the High Court may set it
aside if it is satisfied that;
(a) One of the parties to the arbitration agreement had no capacity to contract
(b) The arbitration agreement was not valid under the law
(c) The award is contrary to public policy in Kenya
(d) The award is contrary to public policy in Kenya
(e) The arbitral tribunal was not appointed in accordance with the agreement
(f) The applicant (dissatisfied party) was not afforded an opportunity to participate in the appointment
of the arbitrator
(g) The arbitral award deals with a dispute not contemplated by the parties.

The Law Society of Kenya

The Law Society of Kenya is a body corporate constituted by the Law Society of Kenya Act. Its
functions, or objects, are, among others -

(a) to maintain and improve the standards of conduct and learning of the legal profession in Kenya;

(b) to facilitate the acquisition of legal knowledge by members of the legal profession and others;

(c) to assist the government and the courts in all matters affecting legislation and the administration and
practice of the law in Kenya;

(d) to protect and assist the public in Kenya in all matters touching, ancillary or incidental to the law. It
is, perhaps, in pursuance of this object that it intends to prosecute those involved in what has
become known as the "Goldenberg Scandal".

An advocate with a practising certificate is required to be a member of the Law Society.

THE LAW OF PERSONS

CONTENTS
1. Read the Study Text provided below
2. Assigned readings: Chapter 4 of Hussain
3. Attempt the reinforcing questions given at the end of the lesson
4. Compare your answers with those given in lesson 9

STUDY TEXT

CONTENTS

1.1 Legal personality

1.2 Corporations
1.3 Unincorporated associations
1.4 Marriage
1.5 Legitimation
1.6 Adoption
1.7 Guardianship
1.8 Nationality
1.9 Domicil and residence
1.1 INCORPORATED AND UNINCORPORATED ASSOCIATIONS

Legal Personality

From a legal point of view, a person is anything, which the laws of a particular country recognize
as having a bundle of legal rights and obligations. Persons in this legal sense are of two types,
namely, natural persons and legal persons, and they are said to possess "legal personality".

Natural Persons

Natural persons or human beings now have legal personality under the laws of probably all
nations of the world. However, this was not so during the days of slave trade. A slave, though a
human being, had no legal rights or obligations under the laws of those countries that recognized
slavery.

Legal Persons

A legal person is known as a corporation, or a 'body corporate'. It has legal rights and obligations
of its own which are distinct from those of the individuals who either constitute its membership or
management. This attribute of legal personality has received considerable judicial exposition in
relation to registered companies and the overall practical effects of the decided cases may be
summarized as follows:

(i) Limited Liability

The debts of the corporation are its own and a member of manager of the corporation
cannot be sued on order to recover the debts. If a corporation such as a registered company
is unable to pay its debts it may be wound-up and during the winding-up its members will
be asked to 'contribute' what is required to pay the debts but a member cannot be asked to
pay more than the amount , if any, that is unpaid on the shares held by him (or the amount
he guaranteed if it is a company limited by guarantee).

This was explained by the House of Lords in the case of Salomon v A. Salomon & Co.
Ltd

(ii) Perpetual Succession

The death of a member or members of the corporation does not result in the death of the
corporation. Members come and go and are merely succeeded by other persons who
become new members. The corporation 'dies' only when its legal life is brought to an end
by a legal process known as liquidation. This is illustrated by the case of Lee v Lee's Air
Farming Co. Ltd in which the company's existence was not terminated by the death of
Lee, who held all its shares.

(iii) Owning of Property

 The property of a body corporate such as a registered cooperative society or a
registered company does not belong to its members. Consequently, a member cannot insure the
property since he does not have insurable interest therein. This can be illustrated by the case of
Macaura v Northern Assurance Co. Ltd. (see (1925) A.C. 619) in which Macaura, the majority
shareholder in a 'one-man company,' insured the company's timber against fire. The insurance
policy was effected in his name and not the company's name. When the timber was destroyed by
fire, he made a claim but the insurance company refused to pay and contended that the policy was
void because he had no insurable interest in the timber. The contention was upheld by the court.
A person cannot, generally speaking, have insurable interest in the property of another person.
The law regards a corporation and its member as separate persons for this purpose.

(iv) Suing or being sued

Because of the legal separation between a corporation and its members, it follows that a
wrong to, or by , the corporation is not a wrong to, or by, its members. It was therefore held
in FOSS V HARBOTTLE (see (1843) 2 Hare 461) that the proper plaintiff to sue or the
defendant to be sued in such cases is the corporation itself. In that case two of the
company's members instituted proceedings against the directors and others, alleging that
the company's property had been misapplied by them. However, the court dismissed the
suit, holding that the company itself was the proper plaintiff to sue the defendants.

(v) Capacity to contract

Lee v. Lees Air Farming Co Ltd

FORMATION OF CORPORATONS

A corporation may be brought into existence by

(a) Registration
(b) Statute
(c) Charter

1.2 TYPES OF CORPORTATIONS

There are four types of corporation which are recognized by the Kenya Law.

(a) Corporation Sole

This is a legal office that is occupied by one human being only at any one time. If the
person ceases to occupy the office, he is succeeded by another person who will then
discharge the duties and exercise the powers of the office. It is a legal person with peretual
succession capacity to sue or be sued. Example are owning of property and limited liability.

Examples are:

(i) The Public Trustee

The Public Trustee Act, S.27(1) states that 'the Public Trustee shall be a corporation
sole by the name of Public Trustee'.

(ii) The Permanent Secretary to the Treasury of Kenya.

Section 2(1) of the Permanent Secretary to the Treasury (Incorporation) Act states
that "the officer for the time being discharging the duties of the Permanent Secretary
to the Treasury of Kenya and his successors in office, shall be a body corporate". It
 should be noted that the Constitution of Kenya which created the office of the
President of Kenya does not have a provision that the office of President shall be a
body corporate.
(b) Corporation Aggregate

This is a legal entity formed by at least two people and whose membership at any one time
legally consists of at least two people. Examples are private and public companies
registered under the Companies Act, and co-operative societies registered under the
co-operative societies Act 1966 (cap.490). It has a legal personality with perpetual
succession, capacity to contract, own property and sue or be sued.

The company acquires legal personality from the date of its registration by the
registrar of companies. The Companies Act, S. 16 (2) provides that " from the date
of incorporation ... the subscribers to the memorandum ... shall be a body corporate
by the name contained in the memorandum". S.28 of the Co-operative Societies Act
provides that "a society, on registration, shall be a body corporate".

(c) Statutory Corporation

This is created by an Act of Parliament and comes into existence from the date of
commencement of the Act. An example of a statutory corporation is the Agricultural
Finance Corporation".

Section 3(1) of the Act states that "there is hereby established a corporation to be known as
the Agricultural Finance Corporation".

Section 3(3) of the Act states that "the corporation shall be a body corporate with perpetual
succession and a common seal".

(d) Chartered Corporation

A chartered corporation may be created under Section 14 of the Universities Act, 1985.
Section 12 of the Act empowers the President of Kenya to grant a charter to any private
university intended to be set up in Kenya if, in his opinion, the grant of the charter to the
Institution concerned may be of benefit to the future development of university education in
Kenya.

S.14 of the Act provides for the publication of the charter in the Gazette and also states that
'with effect from the day of publication of the charter the Institute established by the charter
shall be a body corporate by the name cited in the charter'.

Examples are :

(i) Baratton University, and

(ii) Catholic University of Eastern Africa.
1.3 UNINCORPORATED ASSOCIATIONS

Characteristics of Unincorporated Associations

These are associations of persons who associate to promote a common and lawful purpose. They have
no legal existence of their own and property if any is jointly held or is held by trustees for the
benefit of all members. The rights of the members are enshrined in the constitution of the
association. Members are liable for debts and other obligations of the associations and in the
event of dissolution, members are entitled to share in whatever remains. As a general rule it can
only sue or be sued through its principal officers. The law governing these associations is the law
which regulates the activities they engage in.

In the FORT-HALL BAKERY SUPPLY CO. v WANGOE (un unreported High Court case) a
group of forty-five people had carried on a bakery business under the name of 'Fort-Hall Bakery
Supply Co'. The assumed business employed Wangoe as its manager but later on dismissed him.
In proceedings brought in the High Court to recover a certain amount of money alleged to be
owed by him to the business the court terminated the proceedings as soon as its attention was
drawn to the fact that the association had not been registered under the Companies Act and had
not been formed under any Act of Parliament. The court held that the association must be treated
as non-existent from a legal point of view and could not therefore be allowed to sue.
The commonest examples of unincorporated associations are trade unions, societies and
partnerships.

(a) Trade Unions

These are registered under S.11 of the Trade Unions Act 1952 with the primary
object of regulating the relations between employees and employers. Section 27(1) of the Act
provides that a registered trade union may sue or be sued under its registered name. However,
S.23 provides that no suit or other legal proceedings shall be maintainable in any civil court
against any registered trade union or an officer or member thereof in respect of any act done in
contemplation or furtherance of a trade dispute. S.24 bars any such suits in respect of any tortious
act alleged to have been committed by or on behalf of the trade union. Under S.25, a trade union
is liable on any contract entered into by it or by an agent acting on its behalf.

Because a trade union is not a body corporate, the reference to suits by or against it, and the
word "agent" used in relation to it, are used by way of analogy only.

Under S.41 of the Act, all property of a registered trade union are vested in its trustees for
the use and benefit of the union and its members, and is under the control of the trustees.
The property is vested in trustees because the union, being non-existent legally (i.e it being
not a body corporate) cannot hold or own property in its name.

(b) Societies

These are associations registered under the Societies Act 1968. Section 2(1) of the Act
defines a society very broadly as including any club, company, partnership or other
association of ten or more persons, other than a registered company, corporation, trade
union, co-operative society, registered school, bank or partnership of more than twenty
persons. Examples of such societies are political associations such as K.A.N.U., welfare
societies and football clubs.
 Although registration under the Act does not confer corporate personality on the association
it provides a legal framework for proper management of what is colloquially called the
association's affairs and the machinery for bringing those affairs to an orderly end.

(c) Partnerships

Partnership is defined by S.3(1) of the Partnership Act as "the relation which subsists
between persons carrying on a business in common with a view of profit". It should be
noted that this is a definition of the relationship that exists between the individual persons
who are trading as partners rather than a definition of the apparent entity called a "
partnership". A partnership is not a body corporate because it has no legal personality and
does not exist as a as a legal entity. It cannot therefore, carry on a business. However, S.6
of the Act states that persons who have entered into partnership with one another are called
collectively a firm, and the name under which their business is carried on is called the firm
name.

The following are the practical consequences of the fact that a firm is not a body corporate:

(i) The debts of the firm are the debts of the individuals who are carrying on the
business. S.11 of the Act states that: "every partner in a firm is liable jointly with the
other partners for all debts and obligations of the firm incurred while he is a partner."

In the case of registered companies the company's debts are not the debts of its
members.

(ii) Section 37(1) of the Act provides that the death of any partner in a firm results in
dissolution of the firm unless the partnership agreement, if any, provides otherwise.
In the case of registered companies the death of a member does not cause the
dissolution of the company.

(iii) Because it is legally non-existent, a partnership cannot own property. In effect, the
partnership property is the joint property of the partners who can therefore insure it
individually.

In the case of registered companies, members have no insurable interest in the

company's property.

(iv) Partners may sue or be sued in the firm's name for the firm's debts.

In the case of registered companies, a member or members cannot be sued for the
company's debts

1.8 NATIONALITY OR CITIZENSHIP

Nationality is the legal and political relationship between a person and a particular state which
arises from what may loosely be described as that person's membership of the state. It depends
almost exclusively on the state's domestic law and generally determines the political status and
allegiance of the person concerned. Citizens enjoy certain rights and are subject to various
obligations. The law relating to nationality in Kenya is contained in the Constitution and
Citizenship Act under the provisions of the constitution a person ay become a citizen of Kenya by
birth, descent, registration or naturalization.

(i) Birth
A person may become a national of Kenya by birth in two different ways:
 (a) Birth in Kenya before 11-12-1963
Under s.87 (1) of the constitution any person who, having been born in Kenya, was
on the 11th December, 1963 a citizen of the United Kingdom and colonies or a
British Protected person, became a Kenya citizen on 12th December, 1963 if either
of his parents was born in Kenya. If neither of the parents was born in Kenya the
person concerned must apply for registration as a Kenya citizen if he wishes to
become one.

(b) Birth in Kenya after 11-12-1963

The Constitution of Kenya (Amendment) Act 1985 deleted S.89 of the Kenya
Constitution and inserted a new section with effect from 19th July 1985 which
provides that 'every person born in Kenya after 11th December, 1963 shall become a
citizen of Kenya if at the date of his birth one of his parents is a citizen of Kenya'.
However, such a person shall not become a citizen of Kenya if at the date of his
birth:

1. his father possesses immunity from suit and legal process as is accorded to the
envoy of a foreign state accredited to Kenya,or

2. his father is a citizen of a country with which Kenya is at war and the birth
occurs in a place then under occupation by that country.

(ii) Descent

A person may become a national of Kenya by descent as follows:

(a) Birth outside Kenya before 11-12-63

Section 87(2) of the constitution provides that every person who, having been born
outside of Kenya, was on 11th December, 1963 a citizen of he United Kingdom and
Colonies or a British protected person, shall become a citizen of Kenya on 11th
December, 1963 if his father became, or would but for his death have become, a
citizen of Kenya by birth.

(b) Birth outside Kenya after 11-12-63

Section 90 of the Constitution states that `a person born outside Kenya after 11th
December, 1963 shall become a citizen of Kenya at the date of his birth if at that
date his father is a citizen of Kenya'.
(iii) Registration

A foreigner may become a citizen of Kenya in any of the following ways:

(a) Section 91 of the constitution provides that a woman who has been married to a
citizen of Kenya shall be entitled, upon making application in such a manner as may
be prescribed by or under the Citizenship Act, to be registered as a citizen of Kenya.
She may apply for registration at any time during the lifetime of her husband.

(b) Section 92(1) allows a person who is a Commonwealth citizen, or a citizen of any
country in Africa which permits citizens of Kenya to become their citizens by
registration, to register as a Kenyan citizen if he has been ordinarily resident in
Kenya for a period of prescribed under the Kenya Citizenship Act. Section 17 of the
Citizenship Act prescribes a period of five years immediately preceding the date of
application for registration.
 (c) Section 92(2) states that a person shall be eligible, upon making application in such a
manner as may be prescribed under the Kenya Citizenship Act, to be registered as a
citizen of Kenya if one of his parents is a citizen of Kenya.

(d) Section 88(1) of the constitution permits persons born in Kenya before 11th
December, 1963 to be registered as a Kenya citizen if none of their parents was born
in Kenya.

(iv) Naturalization

This is the legal process by which an alien becomes a citizen in which he is resident. It is
preceded by a formal application to the minister concerned. It is available to all aliens
residents in Kenya. The constitution fixes the minimum conditions an applicant must
fulfill. Under sec 93(1), the minister must be satisfied that the applicant:

(a) has attained the age of twenty-one years;

(b) has been ordinarily and lawfully resident in Kenya for the period of twelve months
immediately preceding his application;

(c) has been ordinarily and lawfully resident in Kenya for a period of, or for periods
amounting in the aggregate to, not less than four years in the seven years
immediately preceding the said period of twelve months;

(d) satisfies the minister that he is of good character;

(e) satisfies the minister that he has an adequate knowledge of the Swahili language, and

(f) satisfies the Minister that he intends, if naturalized as a citizen of Kenya, to continue to
reside in Kenya. However, he must apply for naturalization in such a manner as may
be prescribed by or under the Citizenship Act. The Minister may grant a
CERTIFICATE OF NATURALIZATION thereby constituting the applicant a citizen
of Kenya.

LOSS OF NATIONALITY

(a) Revocation or Deprivation of Citizenship

Section 94 of the Constitution provides that the Minister may, by order in the Gazette,
deprive any person of his Kenya Citizenship acquired by registration or by naturalization if
the Minister is satisfied that:

(a) Disloyalty or disaffection

the citizen has shown himself by act or speech to be disloyal or disaffected towards
Kenya; or

(b) Engagement with alien enemies

the citizen has, during any war in which Kenya was engaged , unlawfully traded or
communicated with the enemy or been engaged in or associated with any business
 that was to his knowledge carried on in such a manner as to assist an enemy in that
war; or

(c) Conviction for a criminal offence

within the period of five years commencing with the date of registration or
naturalization, a sentence or imprisonment of or exceeding twelve months has been
imposed on that citizen by a court in any country or has been substituted by
competent authority for some other sentence imposed in him by such a court; or

(d) Residence outside Kenya.

the citizen has, since becoming a citizen of Kenya, been ordinarily resident in
countries other than Kenya for a continuous period of seven years and during that
period has neither:

(i) been at any time in the service of Kenya or of an international organization of

which Kenya was member; or

(ii) registered annually at a Kenya consulate his intention to retain his citizenship
of Kenya; or

(e) Fraud, Misrepresentation or Concealment.

The registration of naturalization was obtained by means or fraud, false

representation or the concealment or any material fact.

Section 7(1) of the Kenya Citizenship Act provides that the deprivation of citizenship
shall be effective upon the making of the order in the Kenya Gazette.

(b) Renunciation of Citizenship

Section 6(1) of the Kenya Citizenship Act allows any citizen of Kenya of full age and
capacity who is also a citizen of another country to make a declaration of renunciation of
citizenship of Kenya. The declaration is made on Form L and, upon registration of the form,
that person shall cease to be a citizen of Kenya.

Sub-section 2 of section 6 provides that the Minister may refuse to register any such
declaration if it is made during any war in which Kenya is may be engaged in if, in his
opinion, it is contrary to public policy.

(c) Lapsing

Under section 97(1) of the constitution a person who jupon the attainment of 21 years, is a
citizen of Kenya as well as a citizen of some other country, ceases to be a citizen of Kenya
automatically if he does not within the prescribed duration, renounce the citizenship of that
other country, take the oath of allegiance and register a declaration of his intention to
continue residing in Kenya.

1.9 DOMICIL

A person's domicil is that country in which he either has or is deemed by law to have, his
permanent home. It is the country of permanent residence.
The Kenya law relating to domicil is contained in the Law of Domicil Act, Cap 3. The Act
codifies the common law rules relating to domicil with some amendments. Under the provisions
of this Act these are the types of domicil, namely:

(a) Domicil of Origin

Domicil of origin is acquired by a person at the moment of his birth. Section 3 of the Law of
Domicil Act provides that every person shall be deemed to have acquired, at the date of his birth:

(a) If he is born legitimate or deemed to be legitimate, the domicil of his father, or, if he is born
posthumously, the domicil which his father had at the date of his death.

(b) If he is born illegitimate, the domicil of his mother.

These provisions codify the common law rules regarding acquisition of domicil of origin.

The Act also makes the following provisions:

(i) An infant who is legitimated by the marriage of his parents shall acquire the father's domicil
at the date of legitimation.

(ii) Section 4 states that an infant who is a foundling shall be deemed to have acquired the
domicil of the country where he is found.

(iii) Section 5 provides that an infant whose adoption has been authorized by a court shall
acquire the domicil of the adopter or, if adopted by two spouses, that of the husband.

(b) Domicil of Dependence

This is the domicil a person acquires by virtue of legal dependency. It is determined by

The domicil of the other person.

The common law rule that a married woman acquires, on marriage, her husband's domicol known
as the domicol of dependence is codified by Section 7 of the Act. However, the common law rule
that a married woman cannot acquire an independent domicol of choices is modified by S.8(3) of
the Act which provides that `an adult married woman shall not, by reason of being married, be
incapable of acquiring an independent domicil of choice'. This means that a married woman who
is an adult can acquire a domicil of choice separate from that of her husband, whereas a married
woman who is an infant (i.e. one who is not yet eighteen years old) cannot do so.

Domicil of Choice

This is the domicil a person acquires by choosing which country to make his permanent home.

S.8(1) of the Act provides that where a person, not being under any disability, takes up residence
in another country other than that of his domicil with the intention of making that country his
permanent home, or where, being resident in a country other than that of his domicil, he decides to
make that country his permanent home, he shall as from the date of so taking up residence or of
such decision, acquire domicil in that country and shall cease to have his former domicil. The
domicil so acquired is known at common law as the domicil of choice.
 The components of domicil of choice are actual residence and animus manendi (i.e. the intention
of making the place of residence the permanent home).

S.8(4) provides that the acquisition of a domicil of choice by a married man shall not, of itself,
change the domicil of his adult wife or wives. Section 9(2) however, provides that the domicil of
an infant female who is married shall change with that of her husband.

Unity and continuity of domicil

S.10 of the Act provides that no person may have more than one domicil at any one time and no
person shall be deemed to be without a domicil. Although a person may have left the country of
his domicil with the intention of never returning, he will retain that domicil until he acquires a new
domicil of choice. The domicil of origin is, however, not destroyed but is merely put in abeyance
during the continuance of a domicil of choice and is revived by loss of the domicil of choice.

Importance of domicil

It may become necessary to ascertain a person's domicil in order to determine the country whose
laws will govern the validity of his Will relating to moveable property and such other matters like
legitimation, validity of marriage and divorce.

REINFORCING QUESTIONS
1. Examine the concept of legal personality and describe the various kinds of corporations, giving
examples of each.

2. Explain the difference between nationality and domicile and describe the various ways in which a
person may acquire Kenya nationality.

Check your answer with that in Lesson 9 of the Study Pack

COMPREHENSIVE ASSIGNMENT No.1

TO BE SUBMITTED AFTER LESSON 2

To be carried out under examination conditions and sent to the Distance Learning Administrator
for marking by the College.

EXAMINATION PAPER. TIME ALLOWED: THREE HOURS. ANSWER FIVE

QUESTIONS
ALL QUESTIONS CARRY EQUAL MARKS.

1. Explain the statutory provisions relating to the application of African Customary law by
Kenya courts

2. To what extent are the following applicable as sources of Kenya law;

(a) Statutes
(b) Common law, and
(c) Equity?

3. (a) When does a custom become a law?

(b) What is the relationship between customary laws and the Acts of Parliament?
(c) What are the main advantages of case laws?

4. Explain the procedures by which an Act of Parliament is made.

5. When can, or should, a court refrain from following a binding precedent?

6. What are the advantages and disadvantages of delegated legislation as a source of law?

END OF COMPREHENSIVE ASSIGNMENT No.1

NOW SEND TO THE DISTANCE LEARNING CENTRE FOR MARKING

 LAW OF CONTRACT

CONTENTS

1. Read the Study Text provided below

2. Assigned readings: Chapter 5 of Hussein
3. Attempt the reinforcing questions given at the end of the lesson
4. Compare your answers with those given in lesson 9

STUDY TEXT

Contents

1. Sources the Kenya Law of Contract

2. Elements of a contract
3. Capacity
4. Consideration
5. Formality
6. Legality
7. Intention
8. Terms of a Contract
9. Vitiating elements in a contract
10. Discharge of contract
11. Remedies for breach of contract
1. SOURCES OF THE KENYA LAW OF CONTRACT

The Law of Contract Act 1961, S. 2(2) provides that, except as may be provided by any
written law for the time being in force, the common law of England relating to contract,
as modified by doctrines of equity and by the Acts of the United Kingdom Parliament
specified in the schedule to the Act, to the extent and subject to modifications in the said
schedule, shall extend and apply to Kenya. The U.K. Acts specified in the schedule are:

(i) The Law Reform (Married Women and Tortfeasors) Act, 1935.

(ii) The Law Reform (Frustrated Contracts) Act, 1943.

(iii) The Disposal of Uncollected Goods Act, 1952. (This Act is no longer applicable,
having been rendered inapplicable by S. 10 of the Kenya Disposal of Uncollected
Goods Act, 1987).

1.1 Types of Contract

The common law of England relating to contract classifies contracts into the
following categories:

(i) Specialty Contracts - which are executed in a special way (i.e. written, signed
and sealed). The Kenya Law of Contract Act, S. 2(1) provides that no
contract in writing shall be void or enforceable by reason only that is not
under seal. This provision constitutes a significant statutory departure from
the English law relating to specialty contracts.

(ii) Contracts of record e.g. court orders.

(iii) Simple contracts - i.e. agreements that are enforceable by the courts.

For the purpose of these notes "the law of contract" means the law relating to
"simple contracts".

FORMATION OF
A CONTRACT
Definition
This is a legally binding agreement made between two or more parties or persons.
It has also been defined as a promise or set of promises for the breach of which the
law provides a remedy and the performance of which the law recognizes as an
obligation.

All contracts are agreements, but all agreements are not contracts. This is because a
contract imposes upon the parties legally binding obligations.
 Types of Contracts

Formation of Contract

A contract comes into existence when an offer by one party is unequivocally

accepted by another, both parties must have the requisite capacity and some
consideration must pass between them. The parties must have intended to create
legal relations and the purpose of the agreement must have been legal. Any
requisite legal formalities must have been complied with.

The above passage summarises the so-called elements of a contract. In order to

constitute a contact and agreement must be attended by the basic elements.

2. ELEMENTS OF A CONTRACT

1. OFFER

This is an unequivocal manifestation by one party of its intention to contract with another.
It is a clear intimation of intention to contract. The party manifesting the intention is the
offeror and the one to whom it is made is the offeree.

2.2 Nature of An Offer

An offer may take many forms - written, verbal or merely implied from conduct.
The cases which will be referred to in these notes will illustrate this point. But
whatever be the manner of its manifestation, an offer is either a promise made or
something done by a person from which the law will deduce his intention to enter
into a contract with another person if that other person does or promises to do,
something required. It must be distinguished from other acts which resemble it,
such as:

(i) Invitation to treat

This is a mere invitation by a party to another or others to make offers. Again

the offeror becomes offeree and invitee the offeror. A positive response to an
invitation to treat is an offer.

(a) A registered company issues a prospectus inviting the public to apply

for its shares. This is an invitation to treat (i.e. an attempt to "attract"
offers) and not an offer. It is not regarded as an offer because of
practical reasons: If it was an offer, every application made pursuant
thereto would constitute an acceptance and the company would be
contractually bound to allot all the shares applied for. If the issue were
oversubscribed, the company would be sued by some of the applicants
for breach of contract. As this appears to be unjust, the courts have
 avoided the eventuality by regarding the issue of the prospectus merely
as an invitation to treat. When applications are made, they will
constitute the offers. The company then finds out how many shares
have been applied for and, if the issue is oversubscribed, accepts
applications which equal the shares available and "rejects" the others.
The company cannot be sued by those to whom shares have not been
allotted since there is no contract between them and the company: they
made an offer which was not accepted by the company - and the
company could not accept the offer because it did not have shares to
sell.

(b) The display of goods in a shop or supermarket with price labels

attached thereon. The reasons why the courts decided not to regard this
as an offer was explained by Lord Goddard in Pharmaceutical Society
v. Boots. Cash Chemists (Southern) Ltd. Fisher v Bells.

(c) A government ministry puts an advertisement in the newspapers asking

for tenders for the supply of a specified quantity of goods during a
specified period of time. The advert constitutes an invitation to treat
and a trader's response thereto is the offer which the ministry may
accept or reject.

(d) Advertisement of sale by auction

Harris v Nickerson

(ii) Declaration of Intention

A person may do something which, on the face of it, appears to be an offer.

An example is the case of Harris v. Nickerson where it was held that an
advertisement about an intended auction was a declaration of intention (i.e.
a public manifestation of an intended act) but not an offer. Travelling to the
advertised venue does not constitute an acceptance of an offer and the
traveller cannot sue the advertiser for breach of contract if the auction is
cancelled, or some of the goods to be auctioned are withdrawn.

2.3 Rules Relating to an Offer

The case law relating to an offer has established the following rules:
(i) The offer may be oral, written or may be implicated from the conditions of
the offer.

(ii) An offer must be specific or definite (so that the offeree may truly understand
the intention of the offeror and consider his response thereto): Scammel and
Nephew Ltd. v. Ouston in which an offer that referred to "hire purchase
terms” over a period of two years was declared "void" due to uncertainty over
the meaning of "hire purchase terms"

A person cannot be said to have accepted an offer with such conditions: he

would not have understood what he was purporting to accept. However, in
 Stevens v. Mclean the court explained that, an offeror must explain a vague
offer if asked to do so.

(ii) An offer may be conditional or unconditional.

(iv) An offer can be made to:

(a) The general public, as in Carlill v. Carbolic Smoke Ball Co. Ltd.;

(b) A class of persons, as in Wood v. Lektric Ltd - where an offer was

made to "hair sufferers"—a class of persons to whom the court held that
the plaintiff, -Mr. Wood, a young man whose hair was prematurely
turning grey and was, as a consequence, a "hair sufferer" within the
offer, belonged. Mr Wood had properly accepted the offer although it
was not addressed to him personally, or

(c) A particular person, as in Boulton v. Jones

(v) The offer may prescribe the duration the offer is to remain open for
acceptance as Dicknson v Dodds and Routledge v Grant.

2.4 Termination of an Offer

An offer may come to an end by:

- Insanity
- Revocation
- Lapsing of time
- Counter-offer.
- Death
- Rejection
- Failure of a condition subject to which the offer was made.

(a) Revocation

An offer is "revoked" if the offeror changes his mind and withdraws it

(expressly or impliedly). To be valid, the revocation must have been:

(i) Made before acceptance: Byrne v. Van Tien Hoven - in which it was
held that a letter of revocation posted after a letter of acceptance had
been posted was ineffective (although the offeror did not know that the
offeree had posted the letter of acceptance).

(ii) Communicated (i.e. made known) to the offeree - expressly or

impliedly. An example of the implied revocation is the case of
Dickinson v. Dodds (study the judgment of James, L.J.)

Provided the aforesaid rules are complied with, an offer can also be
revoked even though it was declared to be open for a given period. The
 offeror can change his mind at any time before the period expires:
Dickinson v. Dodds

Exceptions

(i) Consideration was given for keeping the offer open. Such an offer
constitutes an "Option". An example is a hire purchase agreement. The
owner of goods cannot tell the hirer that he will not, after all, sell the
goods to him.

(ii) An application for shares in a company made in response to a

prospectus cannot be withdrawn until after the expiration of the third
day after the time of opening of the subscription lists. This is provided
by the Companies Act, S. 52.

(b) Lapse of time

An offer "lapses" (i.e. comes to an end automatically by operation of law) if:

(i) It is not accepted within the stipulated time if any.

(ii) It is not accepted within what appears to the court to be the reasonable
time during which it should have been accepted, e.g. Ramsgate
Victoria Hotel Co. v. Montefiove - an offer to buy shares in a
company could not be accepted at the end of the fifth month after the
offer was made. (June - November)

(iii) Virji Khinji v Chutterback

(iv) It is an offer to sell property, and the property is sold to another party
before the offeree accepts the offer: Dickinson v. Dodds (in which
Mellish L.J. regarded the sale as equivalent to the offeror's death
because it renders performance of the offer impossible)

(c) Counter - offer

A counter - offer is constituted by the offeree's qualified acceptance which, in

itself, becomes the fresh offer and cancels the original offer, e.g. Hyde v.
Wrench - in which the "acceptance" to buy the house for £950 was held to
have cancelled the offer to sell if at £1,000.

(d) Death

The death of either party before acceptance terminates a specific offer.

However, the offer only lapses when notice of death of the one is given to the
other. As was the case in Bradbury v Morgan Mellish Js dictum in
Dickinson V Dodds is emphatic that after an offeror dies his offer cannot be
accepted.

(e) Insanity
 Additionally, the unsoundness of mind of either party before acceptance
terminates the offer. However, the offer only lapses when notice of the
insanity of the one is communicated to the other.
(f) Rejection

This is the refusal by the offeree to accept the offer. The refusal may be
express or by implication. Silence on the party of the offeree amounts to
rejection. As was the case in Felthous v Bindles.

(g) Failure of a condition subject to which the offer was made

An offer made on the basis of a condition or state of affairs existing lapses if

the condition or state of affairs fails to materialize. These are referred to as
conditional offers as was the case in Financings Ltd v Stimson since the
conditions of the motor vehicle in question had changed the dependants offer
to take the same on hire purchase terms lapsed and he was under duty to take
delivery or pay instalments.

2. ACCEPTANCE

This is the external manifestation of assent by the offeree. By acceptance an

agreement comes into existence between the parties. Acceptance takes place at a
very subjective moment when the minds of the parties meet, i.e. Consensus ad
idem. This is the moment at which an agreement comes into existence. However,
this subjectivity must be “externalised”. This is what is referred to as acceptance.
This offer and acceptance give rise to consensus, hence agreement. These two elements constitute
the foundation of every contractual relationship but cannot by themselves constitute a contract.

(a) The offeree must have been aware of, and must have intended to accept the
offer, when he did what is alleged to be the acceptance: The Crown v. Clarke
(Australian case and a persuasive precedent in Kenya). Clarke had made
his statement to the police in order to save himself from the unfounded charge
of murder. He had not made the statement in order to accept the offer which
he had forgotten about at the material time. His statement was not therefore,
an acceptance of the offer to pay the reward.

(b) The offeree's assent must be notified, or made known, to the offeror:
Household Fire Insurance C. Ltd. V. Grant.

This can be illustrated by the case of Felthouse v. Bindely in which it was

held that the nephew's information to the auctioneer that the horse had been
sold could not constitute an acceptance of the plaintiff's offer because he (the
plaintiff) had not been told anything by the nephew.

Exception

An uncommunicated acceptance will be effective if, from the words of the

offer, the offeror can be regarded as having waived the right to be informed of
the acceptance: Carlill v. Carbolic Smoke Ball Co. in which Mrs. Carlill
 was regarded as having accepted the defendant company's offer although she
had not told them that she would buy and use the carbolic smoke balls.

(c) An offer made to the general public can be accepted by anybody who fulfils,
or performs, the conditions stated therein. Carlill v. Carbolic Smoke Ball
Co. - in which Mrs Carlill was held to have accepted the offer although it had
not been made to her personally.

(d) An offer made to a class of persons can be accepted only by a person of that
class: Wood v. Lectrik Ltd. - in which an offer to "hair sufferers" was held
to have been properly accepted by Mr. Wood - a young man whose hair was
prematurely turning grey and was regarded by the court as a "hair sufferer"
within the terms of the offer.

(e) An offer made to a particular person can be accepted only by the particular
person: Boulton v. Jones - in which it was held that an offer made by Jones
to Brocklehurst could not be accepted by Boulton.

(f) The acceptance of an offer must be unconditional: Hyde v. Wrench -in

which it was held that the "acceptance" to buy the house at £950 destroyed the
offer to sell the house of £1,000. Neale v Merrett.

An offer terminated by a counter - offer cannot be revived by a subsequent

tender of performance thereof.

(g) An acceptance of an offer communicated to the offeror verbally by the offeree

is effective from the moment the offeror hears the offeree's words: Entores
Ltd. v. Miles Far East Corporation (obiter dictum by Lord Denning)

(h) If the offeror and offeree negotiate by telephone the acceptance is complete
the moment the offeror hears the offeree's words of acceptance: Entores Ltd.
v. Miles Far East Corporation (obiter dictum by Lord Denning).

(i) If the offeror and offeree negotiate by telex the acceptance will be effective
from the moment that the telex message is received by the offeror: Entores
Ltd. v. Miles Far East Corporation - in which it was held that the contract
was formed in London when the offeror received the telex message from
Amsterdam.

(j) If the offeror expressly or impliedly authorised the offeree to transmit his
acceptance by post the acceptance will be effective at the moment the letter of
acceptance is posted: Byrne v. Van Tien Hoven - in which it was held that
the acceptance was effective when the plaintiffs posted their letter on October
11th in New York (although the defendants in Cardiff were not aware of the
posting)

Implied Authorization to accept by post occurs if:

 (i) The offeror posted his offer but did not tell the offeree not to use the
post, as happened in Byrne's case above.

(ii) The offer was not posted but the court, as a practical matter, regards the
post office as the medium of communication that the parties themselves
contemplated, as happened in Household Fire Insurance Co. v. Grant
- in which the company's letter to Grant by post was held to have been
valid acceptance of Grant's offer although Grant's letter of offer had not
been posted but sent to the company by hand.

Express authorization to accept by post occurs if the offerer tells the offeree to
reply by post, as happened in Adams v. Lindsell in which the offeree was
told to "answer in course of post"

Post office is an agent:

In the cases where the offeror expressly or impliedly authorises the offeree to
accept by post, the law regards the post office as the offeror's agent to
transmit the acceptance. Consequently, as soon an the letter is "handed over"
to the post office (or merely dropped in the letter box) the law regards it as
having been "handed over" to the offeror personally - in accordance with the
principles of the law of agency.

If the letter of acceptance is in fact lost or delayed in transit, the law

disregards that fact: after all, the letter was already received by the offeror -
how can he claim that it was lost or delayed in transit? Legally, it was not lost
or delayed in transit. This is illustrated by the case of Household Fire
Insurance Co. v. Grant in which the fact that the company's allotment letter
never reached Grant was disregarded by the court and Grant ordered to
perform his part of the contract.
(k) An acceptance by post which is neither expressly nor impliedly authorised by the offeror
becomes effective only from the moment the offeror receives the letter of acceptance. In such
cases the post office would be the offeree's agent to transmit his acceptance to the offeror, and
the acceptance would be effective only if the agent actually delivers the message. This rule
appears to be a logical deduction from the explanation given by the court in Byrne's case.

(l) If the offeror gives a letter containing an offer to a messenger and instructs the
messenger to wait for, and receive, the acceptance thereof, the acceptance will
be effective from the moment the offeree put his letter of acceptance into the
messenger's hands: Household Fire Insurance Co. v. Grant (obiter dictum
of Thesinger, L. J.)

(m) An acceptance, once posted, cannot be withdrawn: Household Fire

Insurance Co. v. Grant (Statement of Thesinger, L. J.). This is definitely so
when the acceptance was posted pursuant to an express or implied
authorization by the offeror. The legal position regarding unauthorized
acceptance by post is not clear because there is no decided case on the point.

Examination questions sometimes test candidates' awareness of the

uncertainty by asking, for example, whether an offeree who has posted a letter
of acceptance can telephone the offeror and tell him to disregard the letter of
 acceptance - the examination question being so drafted as to raise doubts
whether the offer was posted or made by other means.

(n) Unless there are specific reasons to the contrary, the mode in which the
acceptance was transmitted does not matter if the offeror actually received
it: Yates Building Co. Ltd. v. Pulleyn & Sons Ltd. - in which it was held
that an acceptance by ordinary post was valid although the offeror had stated
that it had to be by "registered post"

The prescribed mode of acceptance was regarded by the court as "permissive"

or optional. The court's decision might probably have been different if the
offeror had told the offeree to reply by "registered post only", or if the offeror
had prescribed any other mandatory mode of communication.

2.6 Provisional Contracts

Occasionally, an agreement may be described by the parties thereto as being "a

provisional agreement" until a legally binding agreement is prepared by their
advocates and signed by them. In Branca v. Cobarro the court held that the
agreement, though described as provisional, was legally binding already.

The Companies Act, S. 111 uses the word 'provisional' in a very special way and it
was held in Re: 'Otto' Electrical Manufacturing Co. (1905) Ltd. that a 'provisional
contract' there under does not bind a company if the company had not received a
trading certificate.

2.7 Agreement "Subject to Contract"

An agreement described as being "subject to contract" is not legally binding and

merely serves as a written record of what the parties are negotiating about.

3. CAPACITY

3.1 Capacity to Contract

`Capacity' may be described as the legally recognized right of a person to enter into
a legally binding agreement. The law of contract limits in varying degrees the
contractual capacity of the following persons:

(i) Infants or minors,

(ii) Drunken persons and persons of unsound mind,

(iii) Corporations.

(iv) undischarged bankrupts.

3.1.1 Ractral capacity of Infants or minors

An infant or a minor is any person who has not attained the age of eighteen years: Age of
Majority Act 1974, S. 2. An agreement entered into by an infant may constitute a binding,
 voidable or void contract - depending on the object of the agreement.

3.1.2 Binding Contracts

Contracts which are binding on an infant are contracts for:

(i) Necessaries,
(ii) Education, and
(iii) Beneficial service.

(a) Necessaries

'Necessaries' are defined by S. 4(2) of the Sale of Goods Act as "goods

suitable to the condition in life of such infant or minor... and to his
actual requirements at the time of sale and delivery". This provision is
explained by Nash v. Inman in which an infant agreed to buy "an
extravagant number of waistcoats" but failed to pay for them. He was
sued for the price but the court held that he was not liable since the
goods supplied did not fall within the statutory definition of necessaries.

To constitute necessaries, the goods:

(i) Must be suitable to the condition in life of the infant, and

(ii) Must be suitable to the infant's actual requirement at the time of
sale and delivery, i.e. the existing stock of goods (if any) was not
adequate for the infant's needs.

Other necessaries include things like lodging, transport to the place of

work, legal advice, etc.

Liability for Necessaries

S. 4(1) of the Sale of Goods Act provides that the infant is liable to pay
"a reasonable price" for necessaries supplied to him. He is not liable for
the agreed price. This provision raises the question whether the infant's
liability is contractual or quasi-contractual.

(b) Education

An infant may legally enter into a contract for educational instruction.

Some textbooks regard education as part of 'necessaries'.

(c) Beneficial Service

A contract of service or apprenticeship is binding on an infant -

provided it is substantially for his benefit.

In Doyle v. White City Stadium it was held that an infant boxer was
bound by one of the rules and regulations of the British Boxing Board
 of Control, which was not beneficial to him because the rules and
regulations, viewed as a whole, were beneficial to him.
In Clemens v. London and North Western Rail Co. it was held that
the infant plaintiff was bound by the defendant railway company's
railway scheme which fixed a lower rate of compensation for injuries
than the rate fixed by the Employer's Liability Act because the
company's scheme covered a wider range of injuries than the Act.

In De Francesco v. Barnum the court held that an infant dancer was

not bound by a contract of service whose terms were so bad as to
literally put the infant at the disposal of the employer. In Roberts v.
Gray the infant defendant was held liable for breach of contract by his
failure to accompany the plaintiff on a European tour to play billiards
since the contract was substantially for his benefit.

3.1.3 Voidable Contracts

The following contracts are valid and binding upon an infant unless he
repudiates them during infancy or within a reasonable time after attaining the
age of eighteen:

- A lease,
- A partnership agreement,
- A contract to purchase a company's shares.

(a) Leases

A lease granted to an infant is binding on him unless he repudiates it

within a reasonable time after attaining the age of eighteen. In Davies
v. Beynon - Harris the court held that an infant tenant was liable for
the rent of a flat which had accrued before he repudiated the lease. In
Valentini v. Canali the plaintiff, an infant, had agreed to become the
tenant of the defendant's house and to buy the furniture therein at £102.
He paid £68 on account for the furniture, and after, occupying the house
and using the furniture for some months he repudiated the tenancy
agreement and sued to recover the £68. It was held that he could not
recover the money because he could neither give back the benefit
derived from the use of the furniture nor place the defendant in the
position in which he was before the contract.

(b) Partnership Agreement

An infant is bound at common law by a partnership agreement but he is

free to repudiate it at any time during infancy or within a reasonable
time after attaining his majority.

In Bennion v. Harrison the court held that Bennin, an infant who had
been a partner and had held himself out as such to many persons, was
liable for the price of goods which had been sold to the firm because
when he became of age, he had not informed "the world" (i.e. the
 persons who knew him to be a partner or had dealt with him as such)
that he was no longer a partner. He had in fact ceased to act as a partner
during his infancy.

S. 12 of the Partnership Act provides that a person who is under the age
of majority may be admitted to the benefits of partnership but he cannot
be made personally liable for any of the firm’s obligations. S.13 of the
Act provides that an infant partner becomes liable, attaining the age of
majority, for all obligations of the firm incurred since he was admitted -
unless he gives public notice within a reasonable time of his repudiation
of the partnership.

(c) Purchase of Shares

An infant who applies for, and is allotted, a company's shares becomes a member of
the company under S.28 (2) of the Companies Act from the moment that his name is entered in the register
of members. He then acquires membership rights and becomes subject to membership obligations like any
other member. However, he has a legal right to rescind the contract if there has been a total failure of
consideration for which he paid the money (i.e. the shares have become worthless).

In Steinberg v. Scala (Leeds) Ltd. the plaintiff, an infant shareholder,

instituted rectification proceedings with a view to:

(i) Being relieved from liability on calls, and

(ii) Recovery of money she had already paid.

The court held that she should not recover the money already paid because the shares
had some value although she (the plaintiff) had not received any dividends from the company. She was
however entitled to have her name removed from the members' register (as the company had agreed to do).

3.1.4 Void Contracts

If the Infant's Relief Act 1874 of England applies to Kenya as a statute of general application
which was in force in England on 12 August, 1897 then the following contracts which it
renders "absolutely void" in England would also be void if entered into by an infant in Kenya:

- 'Contracts’ for repayment of money lent or to be lent;

- 'Contracts’ for goods supplied or to be supplied (other than contracts for
necessaries),
- All "accounts stated" with infants.

(i) Loans

All loans made to an infant are void and irrevocable. In Leslie Ltd. v.
Sheill the infant defendant had obtained two advances of two hundred
pounds each from the plaintiffs after cheating them that he was an adult.
The plaintiff sued him to recover £475 (the amount of the advances and
accrued interest) for:

(a) Breach of contract, or alternatively,

 (b) Fraudulent misrepresentation (i.e. deceit)

It was held that the infant was not liable because:

(a) There could not be any breach of a void contract, and

(b) The Infants' Relief Act renders loans to infants "absolutely void"
without any exception (cheating by an infant notwithstanding).
The court was also of the view that making the infant liable in tort
(i.e. deceit) would have amounted to an indirect enforcement of a
contract rendered void by statute.

(ii) Loans given for necessaries

It may happen that an infant asks someone for a loan to buy necessaries
such as school uniforms or textbooks. The person, not being aware of
the legal prohibition, agrees to lend the money and eventually does so.
What is the legal position? The loan is irrecoverable and the lender
cannot sue, as lender, to recover the money. This is so because the Act
does not contain any exception to the prohibition.

(iii) Subrogation

In Re National Permanent Benefit Building Society the court stated

that if an infant obtains a loan for necessaries and actually spends it in
paying for necessaries the lender could sue in equity and would be
allowed to stand in the place of those who had sold the necessaries and
would have had at common law a right to sue him if he had not been
paid. This remedy is known as "subrogation" and the lender is said to
subrogated to the rights of the seller and sues as if he were the seller
and had not been paid.

Ratification

If an adult person makes a promise to pay a debt contracted during infancy or perform a void
contract made during infancy, the promise is void and unenforceable against the promisor:
Infants' Relief Act, S. 2.

Although the Infants Relief Act has been repealed in England by the Minor's
Contracts Act, 1987, it appears that it is still a prima facie source of Kenya
Law since the repealing Act has not been made part of the Kenya Law.

3.1.5 Contractual Capacity of Drunken Persons

If a person purported to enter into a contract at a time when he was too drunk
to understand what he was doing and the other party was aware of his mental
condition, the contract will be voidable at his option: Gore v. Gibson in
which the court held that the defendant was not liable on a bill of exchange
which he had indorsed at a time when he was, to the knowledge of the
 plaintiff, so drunk that he could not appreciate the meaning, nature or effect of
the endorsement.

The basis of the court's decision is not the defendant's intoxication but the
plaintiff's inequitable attempt to take advantage of a person in a weaker
position. It would therefore appear that if both parties were materially
intoxicated at the time of contracting they would be bound by the contract
since none of them could take advantage of the other.

The following points should be noted:

(a) Ratification

A drunken man who enters into a voidable contract may affirm or ratify
it when he is sober: Matthews v. Baxter in which the defendant was
held liable for breach of contract to buy some houses from the plaintiff
which he had made when he was drunk but had nevertheless confirmed
after he became sober.

(b) Necessaries

A drunken person is liable to pay for necessaries supplied to him

pursuant to a contract which he entered into when too drunk to know
what he was doing: Gore v. Gibson in which Alderson, B. stated that
the ground of liability is an implied contract to pay for the goods
which arose from his conduct when sober.

(c) The drunken person is liable to pay "a reasonable price" under S.4 of
the Sale of Goods Act. He is not liable for the agreed price - apparently
because, being drunk, he could not know the correct or fair price of the
goods.

3.1.6 Contractual Capacity of Persons of Unsound Mind

A contract entered into by a person of unsound mind is voidable at his option

if it is proved that the other party was aware of his mental condition:
Imperial Loan Co. Ltd. v. Stone, in which Lopes, L. J. stated that "a
contract made by a person of unsound mind in not voidable at that person's
option if the other party to the contract believed at the same time he made the
contract that the person with whom he was dealing was of sound mind". The
following points should also be noted:

(a) Ratification

A contract entered into by a person when he is insane can be ratified by

him when he becomes of sound mind.

(b) Necessaries
 A person of unsound mind, like a drunken person, is liable to pay for
necessaries supplied to him. However, he is only liable to pay
reasonable prices for the necessaries under S. 4 of the Sale of Goods
Act.

3.1.7 Contractual Capacity of Corporations

The courts have developed what is known as the doctrine of "ultra vires" in
order to determine the contractual capacity of legal persons or corporations.

The gist of the doctrine is that a body corporate's contractual capacity is

limited to the attainment of objects or purposes for which it was created. If
the corporation purports to enter into a contract to undertake a transaction
which is neither expressly nor impliedly within its objects. The contract is
"ultra vires" (i.e. "beyond the powers of") the corporation and is void, illegal
and incapable of ratification.

This rule applies to statutory corporations, co-operative societies and

registered companies. This can be illustrated by the case of Ashbury
Railway Carriage and Iron Co. Ltd v. Riche in which the House of Lords
held that a company whose object was, inter-alia, to make railway carriages
could not contract to build a railway line and Riche could not sue the
company for refusing to pay for the expenses incurred toward the construction
of the railway line.

3.1.8 Married Women

At common law, married women have no contractual capacity because they

are presumed to be non-existent (i.e. they are "part" of their husbands—the
two constituting one person who is the husband.)

This common law rule was changed by the Law Reform (Married Women
and Tortfeasors) Act 1935 of England which is applicable to Kenya under the
Law of Contract Act 1961. The Act gives married women full contractual
capacity as if they were " femme sole".

4. Consideration

For an agreement to constitute a contract the common law of England, as adopted in

Kenya, requires that it must be supported by consideration.

Exception

A "specialty contract" need not be supported by consideration. Such a contract is written,

signed by one party, sealed and then delivered to the other party.

4.1 Definition
 There are many definitions of consideration that have been given by various judges
in various cases. The following are some of the definitions:

(i) "... Some right, interest, profit, or benefit accruing to the one party, or some
forbearance, detriment, loss, or responsibility, given, suffered or undertaken
by the other", (per Lush, J., in Currie v Misa, (1875) L. R. 10 Ex. 153, at p.
162).

An example of consideration which is constituted by a benefit accruing to one

party and a detriment suffered by the other is to be found in Carlill's case

(ii) "Consideration means something which is of some value in the eye of the law,
moving from the plaintiff: It may be some benefit to the defendant, or some
detriment to the plaintiff, but at all events it must be moving from the
plaintiff”, (per Patteson. J in Thomas v Thomas.

(iii) " I am content to adopt from a work of Sir Frederick Pollock, to which I have
often been under obligation, the following words as to consideration. 'An act
or forbearance of one party, or the promise thereof, is the price for which the
promise of the other is bought, and the promise thus given for value is
enforceable," (per Dunedin, L.J. in Dunlop Pneumatic Tyre Co. Ltd. v.
Selfridge & Co Ltd.

According to Sir Frederick Pollock, consideration is simply the price paid by

a party to a contract for the promise of the other party. Ultimately it is
evident that consideration is nothing but mutuality.

"Detriment" as consideration

An example of a 'detriment' that will legally suffice as the consideration for a

promise is provided by the case of Carlill v. Carbolic Smoke Ball Co.
When Mrs Carlill acted upon the advertisement by buying and using the
carbolic smoke balls as directed she put herself to some inconvenience at the
advertising company's request. The inconvenience she suffered by having to
swallow so many balls for so many days was the 'detriment' which constituted
the consideration for the defendant company's promise to pay the £100
reward.

4.2 TYPES OF/OR CLASSIFICATION OF CONSIDERATION

Consideration may be executory or executed or past in certain circumstances.

(a) Executory Consideration

Executory consideration consists of a promise made by one party and a promise made by the
other party to the contract. The party exchange mutual promises. Performance of the
obligations remain in futura. It is good considerations to support a claim.

Examples
 i an unmarried man and a lady agree to be married in the near future.
Although nothing has been done yet, there is a contract to marry
between them from the moment they exchange their promises.

The lady's promise is the price, which she pays for the man's promise,
and the man's promise is the price he pays for the lady's promise.

ii Onyango goes to Munene's shop on the tenth day of the month and asks
Munene, a tailor, to make a suit for him. He promises to pay for the suit
at the end of the month. Munene takes Onyango's measurements and
promises to have the suit ready on the last day of the month.

Here, Onyango's promise is the consideration or price for Munene's

promise, and Munene's promise is the consideration or price for
Onyango's promise.

(b) Executed Consideration

Executed consideration is constituted by something done by the plaintiff

because of a promise made by the defendant. It is good consideration to
support a contractual claim.

Examples

1. If in example (2) above Onyango had paid for the suit in advance, the
payment would be the executed consideration for Munene's promise.

2. Mutiso puts an advertisement in the newspapers that he has lost his goat
of a certain description and promises to pay Shs200 to anybody who
returns it. Onyango reads the advertisement, goes to look for the goat,
finds it in the bushes near the Bomas of Kenya and returns it to Mutiso.

Here, what Onyango has done is what constitutes the executed

consideration required to make Mutiso's promise binding on him.

4.3 Rules relating to consideration

The following are the rules which the English courts have developed in
relation to consideration:

i Consideration must be sufficient (real) but it need not be adequate.

What the judge had in mind when formulating this rule could be better
understood after studying the decision in the following three cases:
ST LK V. MYRICK (1809)ILK V. MYRICK (1809)

In the course of the voyage from London to the Baltic, two seamen deserted and a captain,
having unsuccessfully attempted to find replacements at the Croneladt, entered into an
agreement with the rest of the crew under which they would be paid the wages of the two
seamen who had deserted if they worked the ship back to London. The crew worked the ship
back to London as agreed but the captain refused to pay whereupon one of them, the plaintiff,
sued to recover his part of the wages. Lord Ellenborough stated:

"Here, I think, the agreement is void for want of consideration. ... the
desertion of a part of the crew is to considered an emergency of the voyage as
much as their death; and those who remain are bound by the terms of their
original contract to exert themselves to the utmost to bring the ship in safety
to her destined port".

Foakes v Beer (1884)

On the 11th of August, 1875 Mrs Beer recovered judgment against Dr.
Foakes for £2,077 17s 2d for debt and £13 ls 10d for costs. On the 21st of
December 1876 a memorandum of agreement was made and signed by Dr
Foakes and Mrs Beer that, if Dr Foakes paid £500 at once and the balance in
instalments of £150 on the first day of July and January or within one
calendar month after each of the said days respectively in every year until the
whole of the £2,090 19s Od was paid, Mrs Beer would not "take any
proceedings whatever on the judgment". Dr Foakes paid the whole sum of
£2090 19s Od as had been agreed whereupon Mrs Beer asked him to pay the
interest accrued on the judgement. He refused to do so, relying on the
agreement between him and Mrs Beer. Mrs Beer successfully sued for the
interest after contending that the agreement between her and Dr Foakes was
unsupported by consideration. Dr Foakes' appeal to the House of Lords was
dismissed with costs.

Lord Selborne stated:

"No doubt if the appellant had been under no antecedent obligation to pay the
whole debt, his fulfilment of the condition might have imported some
consideration on his part for that promise. But he was under that antecedent
obligation; and payment at those deferred dates, by the forbearance and
indulgence of the creditor, of the residue of the principal debt and costs, could
not (in my opinion) be a consideration for relinquishment of interest and
discharge of the judgement"

Collins v. Godefroy

In this case the plaintiff sued to recover six guineas, being the amount of the
money he had been promised as payment for giving evidence in an earlier
case to which the defendant was a party. He told the court that he had agreed
to give evidence after being promised the money. It was held that there was
no consideration for the promise to pay. When he gave evidence, the plaintiff
was merely performing an existing legal duty imposed on him by the law.
 Looking at the case of Stilk v Myrick, it will be noted that the sailors were
merely doing what they were already legally bound to do, as an implied
term of their contract of employment as sailors, when they put extra effort to
sail the ship back to London. As their normal salary included payment for
working in such contingencies, the captain would have got nothing for paying
the money that he had promised to pay. He was therefore free not to pay it,
"nothing for nothing, something for something" being the basic rule
underlying the common law conception of consideration.

Regarding the case of Foakes v Beer, it should be noted that when Dr Foakes
paid the initial £500 he was merely doing part of something he was already
legally bound to do by the court order of 11th August, 1875. When he
completed paying the agreed instalment, he merely completed doing what he
was already bound to do on 11th August, 1875. Mrs Beer therefore got
nothing for her promise not to ask for interest that would accrue on the
judgement date after 11th August, 1875. She was, as a consequence, free to
break the promise.

These cases illustrate the situations which the courts have dealt with and
decided on the basis that what was done and relied upon by the plaintiff as the
consideration for the defendant's promise was not "sufficient consideration".
They are instances in which the plaintiff had merely performed an existing
legal duty. Such performance, per se, does not constitute consideration for
the promise that induced it. For an act to constitute "sufficient consideration"
it must be real (i.e. something which the plaintiff was not already bound to
do).

4.4 EXCEPTIONS TO THE RULE IN PINNELS CASE

The decision in Pinnels Case that payment of a smaller amount of money cannot
constitute consideration for a promise to accept it in settlement of a debt of a larger
amount does not apply in the following situations:

(a) Payment of a smaller sum at an earlier date

(b) Payment of a smaller sum in kind
(c) Payment of a smaller sum at a different place or venue.
(d) Payment of a smaller sum by a third party
(e) Payment of a smaller sum in addition to an object
(f) Payment of a smaller sum in a different currency
(g) Payment of a lesser sum by a debtor when he has entered into an arrangement
with his creditors to compound his debtor.

In Pinnel's Case (1602), Pinnel sued Cole for a debt of £8 which was due for
repayment on 11th November 1600. Cole's defence was that, at Pinnel's
request, he had paid him £5 on a 1 October and that Pinnel had accepted this
payment in full settlement of the debt. Pinnel won the case on a technical
point of pleading but the court explained that, except for the technical point,
he would have lost the case.
 Brian C. J. stated that "payment of a lesser sum on the day in satisfaction of a
greater cannot be any satisfaction (i.e. consideration) for the whole", but that
it could be consideration if paid:

(b) The rule in Welby v Drake is the principle that if the smaller amount is paid
by a third party, at the creditor's request or with his consent, the payment
would be sufficient consideration for the promise to accept it in full
settlement.

In Welby v Drake (1825) the plaintiff sued the defendant for the sum of £9
on a debt which had originally been for £18. The defendant's father had paid
the plaintiff £9 after the plaintiff had agreed to take that sum in full discharge
of the debt. It was held that the payment of the £9 by the defendant's father
operated to discharge the debt of £18.

The judge stated that, if the plaintiff were allowed to recover the balance, he
would also have been allowed to commit "a fraud on the (debtor's) father,
whom he induced to advance his money on the faith of such advance being a
discharge of his son from further liability".

(c) The rule in Good v Cheesman

If a debtor makes an arrangement with his creditors to compound his debts,

the payment of a smaller amount would discharge a debt of a larger amount.

In such a case, although the creditor is satisfying a debt of a larger sum by the
payment of a smaller, the consideration is the agreement by the creditors with
each other and with the debtor, not to insist upon their full claims.

In Good v Cheesman (1831) the defendant had accepted two bills of

exchange of which the plaintiff was the drawer. After the bills became due
and before this action was brought, the plaintiff suggested that the defendant
meet his creditors with a view to reaching an agreement. The meeting was
duly held and the defendant entered into an agreement with his creditors
whereby he was to pay one-third of his income to a trustee to be named by the
creditors, and that this was to be the method by which the defendant's debts
were to be paid. It was not clear from the evidence whether the plaintiff
attended the meeting though he certainly did not sign the agreement. There
was, however, evidence that the agreement had been in his possession for
some time and it was duly stamped before the trial. No trustee was in fact
appointed, though the defendant was willing to go on with the agreement.

It was held that the agreement bound the plaintiff and the action was
dismissed. The consideration, though not supplied to the plaintiff direct,
existed in the forbearance of the other creditors. Each was bound in
consequence of the agreement of the rest.

THE DOCTRINE OF EQUITABLE OR PROMISSORY ESTOPPEL

(d) (The rule in the "High Trees" Case)

In the Central London Property Trust Ltd. v. High Trees House Ltd it
was held that a landlord who had promised to accept £1,250 instead of the
contractual £2,500 as rent was bound by the promise - even though, at a
common law, there was no consideration for the promise. This decision is
variously referred to as "waiver" or "equitable estoppel". Its basis was
explained by Lord Denning as follows:

"If I were to consider this matter without regard to recent developments in the
law, there is no doubt that had the plaintiffs claimed it, they would have been
entitled to recover ground rent at the rate of £2,500 a year from the beginning
of the term ... because the variation here might be said to have been made
without consideration ... But what is the position in the view of
developments in the law in recent years? The law has not been standing still
since Jorden v Money. There has been a series of decisions over the last
fifty years which, although they are said to be cases of estoppel, are not
really such. They are cases in which a promise was made which was
intended to create legal relations and which, to the knowledge of the
person making the promise, was going to be acted on by the person to
whom it was made, and which was in fact so acted on. In such cases the
courts have said that the promise must be honoured ... As I have said, they
are not cases of estoppel in the strict sense. They are really promises -
promises intended to be binding, intended to be acted on and in fact acted on.
Jorden v. Money can be distinguished, because there the promisor made it
clear that she did not intend to be legally bound, whereas in cases to which I
refer the proper inference was that the promisor did intend to be bound.
In each case the court held the promise to be binding on the party making it
even though under the old common law it might be difficult to find any
consideration for it. The courts have not gone so far as to give a cause of
action in damages for the breach of such a promise but they have refused to
allow the party making it to act inconsistently with it. It is in that sense,
and that sense only, that such a promise gives rise to an estoppel. The
decisions are a natural result of the fusion of law and equity ... The logical
consequence, no doubt, is that a promise to accept a smaller sum in discharge
of a larger sum, if acted upon, is binding notwithstanding the absence of
consideration, and if the fusion of law and equity leads to this result, so much
the better. That aspect was not considered in Foakes v. Beer".

On the other hand, in the circumstances postulated by Lord Denning, the

creditor is not bound by his acceptance of the smaller sum if his promise was
obtained in a manner which a court of equity would regard as "inequitable".
This can be illustrated by the case of D & C Builders Ltd. v. Rees (1965) in
which the facts were as follows.

D & C Builders, a small company, did work for Rees for which he owed £482
l3s ld. There was at first no dispute as to the work done but Rees did not pay.
In August and October, 1964, the wife of Rees (who was then ill) telephoned
the plaintiffs, complained about the work, and said, "My husband will offer
you £300 in settlement. That is all you will get. It is to be in satisfaction." D
& C Builders, being in desperate straits and faced with bankruptcy without
the money, offered to take the £300 and allow a year to Rees to find the
balance. Mrs Rees replied: "No, we will never have enough money to pay the
balance. £300 is better than nothing." The plaintiffs then said: " We have no
choice but to accept." Mrs Rees gave the plaintiffs a cheque and insisted on a
receipt worded "in completion of the account." The plaintiffs later brought an
action for the balance. The defence was bad workmanship and also that
there was a binding settlement. The question of settlement was tried as a
preliminary issue and the judge, following Goddard v. O'Brien (1880),
decided that a cheque for a smaller amount was a good discharge of the
debt, this being the generally accepted view of the law since the decision of
that case. On appeal it was held that Goddard v, O'Brien was wrongly
decided and that the payment by a debtor, whether in cash or by cheque, of a
lesser sum than the amount of the debt was not a settlement of the debt which
was binding at law on the creditor.
In the course of his judgement Lord Denning stated:

"This case is of some consequence: for it is a daily occurrence that a merchant

or a tradesman, who is owed a sum of money is asked to take less. The debtor
says he is in difficulties. He offers a lesser sum in settlement, cash down. He
says he cannot pay more. The creditor is considerate. He accepts the
proffered sum and forgives him the rest of the debt. The question arises: Is
the settlement binding on the creditor? The answer is that, in point of law, the
creditor is not bound by the settlement. He can the next day sue the debtor for
the balance, and get judgement. The law was so stated in 1602 by Lord Coke
in Pinnel's Case and accepted in 1889 by the House of Lords in Foakes v.
Beer.
Now, suppose that the debtor, instead of paying the lesser sum in cash, pays it
by cheque. He makes out a cheque for the amount. The creditor accepts the
cheque and cashes it. Is the position any different? I think not. No sensible
distinction can be taken between payment of a lesser sum by cash and
payment of it by cheque ... This doctrine of the common law has come under
heavy fire. But a remedy has been found. The harshness of the common law
has been relieved. Equity has stretched out a merciful hand to help the debtor
... We can now say that when a creditor and a debtor enter on a course of
negotiation which leads the debtor to suppose that, on payment of the lesser
sum, the creditor will not enforce payment of the balance, and on the faith
thereof the debtor pays the lesser sum and the creditor accepts it as
satisfaction, then the creditor will not be allowed to enforce payment of the
balance, when it would be inequitable to do so ... In applying this principle,
however , we must note the qualification: The creditor is only barred from his
legal rights when it would be inequitable for him to insist upon them. Where
there had been a true accord, under which the creditor voluntarily agrees
to accept a lesser sum in satisfaction, and the debtor acts upon that accord
by paying the lesser sum and the creditor accepts then it is inequitable for the
creditor afterwards to insist on the balance. But he is not bound unless there
has been truly an accord between them. In the present case, on the facts as
found by the judge, it seems to me that there was no true accord. The debtor's
wife held the creditor to ransom ... No person can insist on a settlement
procured by intimidation".
4.5 1. Adequacy of consideration

Provided that consideration is sufficient, or real, it need not be

adequate. The court will not compare the value of the defendant's
promise with the value of the plaintiff's act or promise in order to
determine the fairness of the transaction. The parties are presumed to
have concluded a fair bargain and the court will not assist any one of
them who alleges that he made a bad bargain. This is illustrated by
Thomas v. Thomas in which it was held that a payment of £1 per year
for the use of a house was binding on the executors of the deceased
owner (Thomas) who had promised to accept the payment.

2. Consideration must move from the promisee

The rule that "consideration must move from the promisee" means that
only a person who has personally given consideration for a promise can
sue for breach of the promise. A person who has not given
consideration for a promise cannot sue the promisor for the simple
reason that he cannot expect to get something for nothing. The common
law regards a contract as a bargain between the parties to a commercial
transaction, each of whom has bought the promise of the other with his
own promise or act.

This is illustrated by the case of Dunlop v Selfridge in which the

appellants were motor tyre manufacturers and sold tyres to Messrs Dew
& Co. who were motor accessory dealers. Under the terms of the
contract Dew & Co. agreed not to sell the tyres below Dunlop's list
prices, and as Dunlop's agents, to obtain from other retailers a similar
undertaking. In return for this undertaking Dew & Co. were to receive
discounts, some of which they could pass on to retailers who bought
tyres. Selfridge & Co. accepted two orders from customers for Dunlop
covers at a lower price. They obtained the covers through Dew & Co.
and signed an agreement not to sell or offer the tyres below list price. It
was further agreed that £5 per tyre so sold should be paid to Dunlop by
way of liquidated damages. Selfridge's supplied one of the two tyres
ordered below list price. They did not actually supply the other, but
informed the customer that they could only supply it at list price. The
appellants claimed an injunction and damages against the respondents
for breach of the agreement made with Dew & Co., claiming that Dew
& Co. were their agents in the matter. It was held that there was no
contract made between the parties. Dunlop could not enforce the
contract made between the respondents and Dew & Co. because they
had not supplied the consideration. Even if Dunlop were undisclosed
principals, there was no consideration moving between them and the
respondents. The discount received by Selfridge was part of that given
by Dunlop to Dew & Co. since Dew & Co. were not bound to give any
part of their discount to retailers the discount received by Selfridge
operated only as consideration between themselves and Dew & Co. and
could not be claimed by Dunlop as consideration to support a promise
not to sell below list price.
Viscount Haldane stated:

"My Lords, in the law of England certain principles are fundamental.

One is that only a person who is a party to a contract can sue on
it....A second principle is that if a person with whom a contract not
under seal has been made is to be able to enforce it consideration
must have been given by him to the promisor or to some other
person at the promisor's request....I am of opinion that the
consideration, the allowance of what was in reality part of the discount
to which Messrs. Dew, the promisees, were entitled as between
themselves and the appellants, was to be given by Messrs Dew on their
own account, and was not in substance any more than in form, an
allowance made by the appellants".

Although Viscount Haldane spoke of "a second principle" it would

appear that there is no "second principle" as such. What appears to be a
"second principle" is merely a verbal variation of the basic rule that
consideration must move from the promisee - for only then can he say
that he is "a party to the contract " and be entitled to sue on it as such.

This rule that consideration must move from the promisee is also
known as the "privity of contract" rule and the effect of it is that an
agreement between A and B for the benefit of C, if broken, cannot,
generally speaking, be enforced by C.

Exceptions to the doctrine of Privity of contract

There are a number of exceptions to the privity of contract rule of which

the following may be stated:

(a) Agency

A principal may sue on a contract made by an agent.

This exception is perhaps more apparent than real because the

principal rather than the agent is regarded as the contracting party.

(b) Negotiable instruments

A holder in due course of a bill of exchange can sue prior parties

thereto although there is no privity of contract between him and
any of them.

This is a statutory exception under the Bills of Exchange Act.

(c) Third party insurance

A person injured in a car accident can sue the insurance company

which insured the car against such risks although he is not a party
 to the contract between the owner of the car and the insurance
company.

This is an exception under the Motor Insurance (Third Party

Risks) Act.

(d) Legal assignment

The assignee of a debt may sue the debtor in his own name under
the Indian Transfer of Property Act, 1882.

(e) Covenants running with land

The plaintiff, in order to succeed in the case, must prove to the court
that he was induced to do what he did by the promise which the
defendant made and that he would not have done what he did if the
defendant had not made the promise. In such a case the plaintiff's act
and the defendant's promise constitute a single transaction or bargain.
If the plaintiff performed the act before the defendant made the
promise, the performance of the act would not constitute consideration
for the defendant's promise.

This may be illustrated by the case of Re McArdle. in which the facts

were as follows:

McArdle, his wife and his mother lived in a dwelling-house forming

part of the estate of his father. He and his brothers and sister were to
inherit the house under their father's will after their mother's death. In
1943 and 1944 Mrs McArdle carried out certain improvements and
decorations in and on the house, the cost of which amounted to £488.
In April, 1945 McArdle and his brothers and sister signed a document
addressed to Mrs. McArdle which provided: "In consideration of your
carrying out certain alterations and improvements to the dwelling-house
at present occupied by you, we the beneficiaries under the will of our
father hereby agree that the executors... shall repay to you from the said
estate when so distributed the sum of £488 in settlement of the amount
spent on such improvements. Dated April 30, 1945". In 1948 the
children's mother (the tenant for life) died, and Mrs. McArdle claimed
payment of £488 which was refused and she sued for the money.

It was held that the consideration for the execution of the document of
April 30, 1945, being past, the document was a nudum Pactum and
was unenforceable against the authors. Jenkins, L.J. stated:

"No question of conscience enters into the matter for there is no

consideration and there is nothing dishonest on the part of an intending
donor if he chooses to change his mind at any time before the gift is
complete ... as the work had all been done and nothing remained to be
 done by Mrs McArdle at all, the consideration was wholly past, and,
therefore, the beneficiaries' agreement for the repayment to her of the
£488 out of the estate was nudum pactum - a promise with no
consideration to support it. That being so, it is impossible for Mrs.
McArdle to rely on this document as constituting an equitable
assignment for valuable consideration". A similar policy was made in
Roscorla v Thomas.

Exceptions

A plaintiff may rely on past consideration in the following instances:

(a) Where services are rendered at the express or implied request of

the defendant in circumstances which raise an implication of a
promise to pay. This may be illustrated by the following cases:

(i) Lampleigh v Brathwait

The defendant who had killed a Mr. Patrick Mahume asked

the plaintiff to endeavour to obtain a pardon for him from
the King. The plaintiff thereafter exerted himself to this
end, "riding and journeying at his own charges from
London to Royston, when the King was there, and to
London and back, and so to and from Newmarket to obtain
pardon for the defendant for the said felony". After the
pardon was granted by the King the defendant promised to
pay the plaintiff £100 for his endeavours but failed to
honour the promise.

When sued for the £100 the defendant pleaded past

consideration but the court held him liable.

(ii) Re Casey's patents (1892)

Patents were granted to Stewart and another in respect of an

invention concerning appliances and vessels for
transporting and storing inflammable liquids. Stewart
entered into an arrangement, with Casey whereby Casey
was to introduce the patents. Casey spent two years
"pushing" the invention and then the joint owners of the
patent rights wrote to him as follows:

"In consideration of your service as the practical manager in

working both patents we hereby agree to give you one-third
share of the patents".

Casey also received the letters patent. Some time later

Stewart died and his executors claimed the letters patent
from Casey, alleging that he had no interest in them because
 the consideration for the promise to give him a one-third
share was past.

It was held that the agreement was binding.

These two cases may be explained as follows.

If you ask someone to do something for you and doing it

will make him spend some money, you are under an
implied legal obligation to pay a reasonable amount as
compensation for the anticipated expenses. When you later
on promise to pay some money after the thing has been
done, you are merely fixing the reasonable amount which
the law all along expected you to pay. The service rendered
is not past consideration.

(b) Negotiable Instruments

Past services may constitute valuable consideration for a bill of

exchange under s.27 of the Bills of Exchange Act which provides
that valuable consideration for a bill may be constituted by "an
antecedent debt or liability".

If the brothers-in-law in Re McArdle, above had given Mrs.

McArdle a bill of exchange or promissory note for £488 payable
after their mother's death they would have been liable on it even
though the work on the house had been completed by the time of
drawing the bill or promissory note.

(c) Acknowledgement of statute barred debt

An acknowledgement of a statute-barred debt is binding under

Limitation of Actions Act 1968 even though it is made in respect
of a past debt.

(d) Consideration must be legal

The act or promise offered by the offeree as consideration for the

other parties. Promise must be one permitted by law. Illegal
consideration invalidates the contract.

(e) Consideration must be something in excess of a public duty

Performance by the plaintiff or a public duty imposed upon him by

law is not sufficient consideration for the defendants promise.
This is because the plaintiff is already legally bound to do so as
was the case in Collins v Godefroy. However in England v
Davidson and Glassbook Brothers v Glamorgan country
 Council consideration was sufficient since the parties had done
more that duty required.

(f) Considerations must be something in excess of an existing

contractual obligation

Performance by the plaintiff of an existing contractual obligation is

not sufficient consideration for the defendants promise. This is
because the plaintiff is already legally bound to do so as was the
casein Stilk v Myrrick. However , if the plaintiff does something
of excess of an existing contractual obligation such a thing
constitute good consideration. As was in the case in Hartley v
Ponsonby.

5. FORMALITIES

For an agreement to constitute a valid and enforceable contract it must have been entered
into in the form, or manner, if any, prescribed by law. The general rule at common law
is that a contract can be entered into orally, in writing, partly orally and partly in writing,
or may be merely implied from conduct:

Requirements of writing

5.1 BILLS OF EXCHANGE AND PROMISSORY NOTES:

The Bills of Exchange Act defines a bill of exchange as follows:

"A bill of exchange is an unconditional order in writing ...." The Act further states
that an instrument which does not comply with these conditions ... is not a bill of
exchange. To be valid, therefore, a bill of exchange must be made in writing. This
requirement also applies to Promissory Notes under S. 84(1) of the Bills of
Exchange Act.

5.2 REPRESENTATIONS REGARDING CHARACTER OR CREDIT:

Statements relating to a person's credit-worthiness will only be actionable if made in

pursuance of a contract which was in writing. The Law of Contract Act, S.3(2)
states as follows:

"No suit shall be brought whereby to charge any person upon or by reason of any
representation or assurance made or given concerning or relating to the character,
conduct, credit, ability or dealings of any other person to the intent or purpose that
such other may obtain credit, money or goods, unless such representation or
assurance is made in writing, signed by the party to be charged therewith".

5.3 TRANSFER OF SHARES IN A COMPANY REGISTERED UNDER THE

COMPANIES ACT:
 Section 77 of the Companies Act prohibits an incorporated company from
registering any transfer of shares or debentures of the company unless a proper
instrument of transfer has been delivered to the company.

5.4 ACKNOWLEDGEMENT OF STATUTE BARRED DEBTS:

If an action for a simple contract debt has been barred by the limitation period of six
years, it is possible for the right of action to be revived by an acknowledgement or
part payment. S.24 of the Limitation of Actions Act, 1968 provides that for such an
acknowledgement to be effective it must be in writing and signed by the person
making it, or his agent.
5.5 TRANSFER OF IMMOVABLE PROPERTY:

S.54 of the Indian Transfer of Property Act, 1882 (Note: This Act is applicable in
Kenya) requires that a transfer of immovable property worth over 100 rupees must
be by a registered instrument. The requirement of registration makes a written
document necessary.

The above contracts are void unless they are made in writing.
(b) Requirement of written evidence

These contracts must be evidenced by some note or memorandum.

(i) CONTRACTS OF GUARANTEE:

The Law of Contract Act, 1961, S.3 (1) provides:

"No suit shall be brought whereby to charge the defendant upon any special
promise to answer for the debt, default or miscarriage of another person
unless the agreement upon which such suit is brought, or some
memorandum or note thereof, is in writing and signed by the party to be
charged therewith, or other persons thereunto by him lawfully authorized."

(ii) CONTRACTS FOR THE SALE OF AN INTEREST IN LAND:

The Law of Contract (Amendment) Act, 1968, provides:

"No suit shall be brought upon a contract for the disposition of an interest
in land unless the agreement upon which the suit is founded, or some
memorandum or note thereof is in writing and is signed by the party to be
charged or by some person authorised by him to sign it. Provided that such a
suit shall not be prevented by reason only of the absence of writing, where an
intending purchase or lessee who has performed or is willing to perform his
part of a contract-

(i) has in part performance of the contract taken possession of the property
or any part thereof; or
 (ii) being already in possession, continues in possession in part
performance of the contract and has done some other act in furtherance
of the contract.

NOTE:

(a) The agreement itself need not be in writing, so long as a "note or

memorandum" is in existence. Such note or memorandum must contain
the essential terms of contract - e.g.

(i) the names of the parties:

(ii) description of the property;

(iii) the nature of the consideration.

This evidence could be contained in two documents, provided that the

documents could be connected, as it was in one case where an address
on an envelope was connected with the letter contained therein.

The signature to be attached to such a document must be that of the

person against whom the contract is to be enforced or a person
authorised on his behalf. The term "signature" includes a rubber stamp.

(b) If there is evidence of part performance in the form of possession by the

purchaser or a lessee the Court will permit oral evidence of a contract
for the sale of land to be given, and the Court will award an order of
specific performance.

(iii) EMPLOYMENT CONTRACTS FOR OVER ONE MONTH,

UNDER S.5 OF THE EMPLOYMENT ACT.

6. ILLEGALITY

6.1 For an agreement to constitute a legally enforceable contract, it must have been
entered into for a lawful purpose. An agreement to do something which is
prohibited by statute or the common law is not a contract - although such
agreements are generally called "illegal contracts"

6.2 ILLEGAL CONTRACTS

There are numerous examples of "illegal contracts" of which the following may be
mentioned:

a. Contracts illegal by statute

 Whether a particular contract is prohibited by a particular statute depends on
the wording of the statute. For example, employment act, contracts for the
payment of wages or salaries in kind are illegal.

b. Contracts illegal at the common law

A contract which is prohibited by the common law is usually described as

being "contrary to public policy" (i.e. the court is of the view that it is in the
public interest that the contract should not be enforced). Such a contract may
be one which:

(i) Tends to promote corruption in the public service, as illustrated by

Parkinson v. College of Ambulance Ltd. (1925),

(ii) Tends to promote sexual immorality, such as in Pearce v. Brooks

(1866)

(iii) Tends to interfere with the sanctity of marriage, such as Wilson v.

Carnley (1908).However, in Fender v. St. John - Mildmay (1938) the
House of Lords held that a contract made between decree nisi and
decree absolute, for marriage after the dissolution of the existing
marriage is valid (despite the fact that it rendered reconciliation
between parties to the divorce proceedings almost impossible).

(iv) Tends to fetter the freedom of marriage.

(v) Tends to prejudice the administration of justice, such as -

(a) Champerty: Trendex Trading Corporation v. Credit Suisse

(1982), or
(b) Maintenance.

(v) Tends to prejudice the administration of justice.

(a) champerty agreement

(b) maintenance: Trendex Trading Corporation v Credit suise.

Effects or Consequences of Illegality

Illegality renders a contract unenforceable. The contract creates no rights and

imposes no obligations on the parties. This is because the contract is beyond the
pale of law hence neither party has a legal remedy. As a general rule money or
goods changing lands under an illegal contract are irrecoverable. This is because
gains and losses remain where they have fallen. A court of law cannot assist parties
to adjust their rights if the contract is tainted with illegality. However money or
goods changing hands under an illegal contract may be recoverable where

(a) a party repents or regrets the illegality before the contract is substantially
performed.
(b) The parties are not in pari delicto i.e. not equally to blame.
 (c) The owner of the goods or money establishes title thereto without relying
upon the illegal contract as was the case in Amar Single Kulubya.

VOID CONTRACTS

These are contracts which the law treats as non-existent. As a general rule illegal contract is
only void but not certain rights may be salvaged by the innocent party. A contract may be
rendered by statute or at common law i.e. courts of law.

Contracts void by the statute.

Wagering contract.

This is a contract whereby two persons or groups of persons with different views on the outcome of an uncertain
future event agree that some consideration is to pass depending on the outcome.

Contracts void at common law

These are contracts declared void by courts of law for being contrary to public policy namely

I. Contract of the courts

II. Contract prejudicial to the statute of marriage
III. Contracts in restraint of trade

CONTRACTS IN RESTRAINT OF TRADE

This is a contract by which a person voluntarily or involuntarily restricts his future liberty to carry on his trader
business or profession in such manner or with such persons as he chooses e.g. an employer restraining an employee
from working for a business rival. At common law contracts in restraint of trade are prima facie void for being
contrary to public policy. However such a contract may be enforced it is proved that;

a) The restraint was reasonably necessary to protect the restraining party’s interest
b)The restraint was reasonable to affected party
c) The restraint was not injurious to the public.

Contracts in restraint of trade are both voluntary and involuntary

Voluntary restraints

These are contracts where by a party consents to be restrained by the other for example

Restraint accepted by an employee

The employer restraints the employee from working for a business rival or setting up a similar
business. Such a restraint may be enforced if reasonable to both parties and is not injurious to
the public.
In Automan v Taylor the defendant who was an employee of the plaintiff covenanted not to
work in a tailoring business within 3 years of quitting employment. However he worked in one
of the areas before the 3 years expired, the plaintiff sued for an injunction was granted.

However in Attwood v Lamont where the defendant as the head of the cutting department in a
tailoring business covenanted not to engage in tailoring business within a radius of l0 miles and
the plaintiff applied for an injunction. It was held that the restraint was too wide and hence
unreasonable to be enforced.

A similar holding was made in Kores Manufacturing co v Kolok Manufacturing Co where

two competing companies had covenanted not to employee each other’s employee within a
duration of 5 years. The defendant company employed a former employee of the plaintiff with
5 years. It was held that the restraint was unreasonable to both companies.

Worldwide restraint may be enforced if reasonable and can only be effective if enforced on a
worldwide basis. It was so held in Norclenfelf v Maxim Nordenfelt Guns and Ammunition
Company (1984). Nordenfelt was the manufacturer of a quick firing and loading gun and
ammunition. He sold his business to a company for 287 500, 2 years later the company merged
with another and employed Nordenfelt as the Managing Director at a salary of 2,000 per year.
The contract of employment restrained Nordenfelt from;

1) Carrying on or engaging in the business of manufacturing explosives or ammunition in any

part of the world for 25 years.

2) Competing with the business of the company for 25 years.

The House of Lords held that where as the covenant not to engage in gun trade was reasonable and enforceable but
the covenant not to compete with the company for 25 years was unreasonable.

Restraint accepted by a seller of a business

Under this contract the buyer of the business restraints the seller from setting up a similar
business door, this may be necessary to protect good will. Such a restraint is prima facie void.
In enforcing such a restraint the court considers;

a. The area covered by the restraint

b. Its duration and other relevant circumstances
c. Nature or character of the business

In Dias v Souto (1960) the defendant sold a shop situated on the island of Zanzibar. It is
specialized in goods for expatriate community. He sold the shop to the plaintiff and covenanted
not to set up a similar business within the Zanzibar protectorate. He established a similar
business on the island of Pemba, the plaintiff sued for an injunction. An injunction was granted
on the ground that the defendant was likely to injure the plaintiff’s commercial position by
rescission of the specialized nature of the business.

Restraints Restraint accepted by distributors or sellers of goods (sole agreement)

The seller or distributor agrees to purchase all his goods from a particular manufacturer or
wholesaler in return for a specified discount. The purpose of the restraint is to prevent the seller
from distributing the products of a competitor. Sales agreements take any of the following
forms;

(a) Tying covenant

This is a contract by which a seller agrees to purchase all his goods from a particular
manufacturer or wholesaler.

(b) Compulsory trading covenant:

This is a contract by which a seller covenants to keep his business open for reasonable
hours everyday.

(c) Continuity covenant

This is a contract by which the seller agrees to extract similar covenants from the person
who purchases the business from him. Solus agreements are prima facie void unless
reasonable and not injurious to the public.

A partial restraint may be enforced by a court of law to protect clients, trade secrets etc.
However a restraint whose purpose is to keep off competition is unenforceable.

Involuntary restraints

These are restraints imposed by professional bodies and trade associations on their members for certain purposes
e.g. enhancement of standards of conduct. At common law such restraints are prima facie void but may be enforced
if it is proved that they are reasonable and are not injurious to the public.

Contracts in Restraints of Trade in Kenya

The principles or rules governing contracts in restraint of trade in Kenya are contained in the
Contracts in Restraint of trade Act under sec.2 of the act contracts in restraint of trade in Kenya
are legally binding, however the High court is empowered to declare such a contract void if it is
satisfied that the restraint is unreasonable in that it affords more protection than necessary or is
injurious to the public. To make its decision the court must have regard to

a. The nature of trade, business, occupation or professional

b. Area covered by the restraint
c. Duration of the restraint
d. Other circumstances of the case

7 INTENTION

For an agreement to constitute a contract, the parties thereto must have intended it to have
legal consequences. Consequently, an agreement that contains an express declaration
that it is NOT intended to have legal consequences (e.g. the "Honourable Pledge Clause"
in ROSE AND FRANK v. CROMPTON BROS) will not be enforced by the courts
despite its embodying all the other elements of a valid contract.
In practice, however, parties do not direct their attention to this point when negotiating
with each other, with the consequence that the courts have, as it were, been called upon to
"fill the gaps". This they have done by formulating certain principles or "presumptions"
that will apply in the absence of an express declaration to the contrary.

These presumptions are as follows:

7.1 BUSINESS AGREEMENTS;

There is a rebuttable presumption that parties intended create a legally enforceable
agreement for example in Crlills case, Edwards v Skyways Ltd. However legal
intention may be expressly negative by the use of honour clauses as was the case in
Rose and Frank V Crompton Brothers.

7.2 DOMESTIC OR FAMILY AGREEMENTS:

There is a rebuttable presumption that the parties did not intend to create legal
relations.

(a) Agreements between husband and wife:

(i) Where the husband and wife are living together amicably, there is a
legal presumption that any agreement they enter into is NOT legally
binding: BALFOUR v. BALFOUR. This principle appears to be a
consequence of a legal apprehension that ill-advised litigation will
destroy the domestic tranquillity generally prevailing in the home, or
the love between the parties.

(ii) Where the husband and wife have separated, or are about to separate, so
that the marriage is practically over, any agreement entered into by the
spouses is presumed to have been intended to be legally binding e.g.
MERRIT v. MERRIT. In such a case, there is no love between the
parties which litigation might destroy.

(b) Agreement between Parent and Child:

It was held in JONES v. PADAVATTON that an agreement between a

parent and a child (in that case, between mother and daughter) is presumed
NOT to have been intended to be legally binding. The court added that such
agreements depend entirely on the goodwill of the parties thereto.

(c) Agreement between Uncle and Niece or Nephew:

In Jones v. Padavatton, Salmon L.J. stated: "As a rule when arrangements

are made between close relations, for example between husband and wife,
parent and child or uncle and nephew in relation to an allowance, there is a
presumption against an intention of creating any legal relationship".

7.3 SOCIAL AGREEMENTS

 Professors Chesire and Fifoot have expressed the view that "to invite a friend for
dinner is not to invite litigation" and it is generally stated that social agreements
between friends are presumed NOT to have been intended to be legally binding.

8 TERMS OF A CONTRACT

The promises which the parties to a contract make to each other are known as the "terms"
of the contract. They are graded by the law into the following categories:

(a) Conditions

This is a term of major stipulation in a contract. It is part of the central themes. It

runs to the part of the contract. consequently, if it is broken, the injured party may -

(i) treat the contract as repudiated and sue the party at fault for damages,

(ii) affirm the contract and sue for damages.

As was the case in Poussard v Spiers and Pond

When it is said that a term which is a condition "goes to the root of the contract" it
merely means that the aggrieved party attached so much importance to the term
that, if he had known that there would be a breach of it, he would not have entered
into the contract. For example, there is an (implied) condition under s.14(2) of the
Sale of Goods Act that the seller has "a right to sell" (i.e. he is the owner of) the
goods. If the goods are stolen goods, and the buyer had been aware of this fact, he
would not have entered into the contract. This is a minor term, or a term of minor
stipulation. It is a collateral or peripheral term of a contract. It is not part of the
contral theme.

(b) Warranties

There is no precise legal definition of a "warranty" which, in legal nomenclature, is

susceptible to a variety of interpretations. However, for the purposes of the law of
contract, it is generally contrasted with a condition. It is generally described as a
stipulation which does not go to the root of the contract and breach of which does
not entitle the aggrieved party to treat the contract as at an end, but entitles him only
to sue for damages. Warranty of quiet possession of goods each of warranty
entitles the innocent party to sue for damages but the contract remains enforceable.
As was the case in Beffini v Gye and in Kampala General Agency v Modys (EA)
Ltd This is a rather lofty or vague phraseology but a more useful approach is to
divert to the examples of warranties implied, or given, in s.14 of the Sale of Goods
Act, namely:

- the warranty of "quiet possession", and

- the warranty that the goods shall be free from undisclosed encumbrances.
8.1 Purpose of Categorization

As might have been implicit from their descriptions, the purpose of the legal
categorization of contractual terms is to assist in the determination of the legal
consequences of their breach. For the party contemplating a breach, it is very
important to be aware of the legal consequences that will ensue from implementing
his decision.

8.2 Express terms

The terms of a contract are said to be "express terms" if the parties themselves
adverted to them at the time of negotiations and actually agreed upon them (i.e.
incorporated them into the contract, either verbally or in writing). Written terms
prevail over unwritten terms. Handwritten terms prevail over others.

8.3 Implied terms

A term which the parties did not expressly incorporate into the contract may
nevertheless be deemed to be one of the terms of the contract by implication. This
may be necessary in order to "give business efficacy to the contract", as explained
in The Moorcock. Alternatively, the term may be implied by an Act of Parliament,
such as the implied conditions and warranties implied by the Sale of Goods Act.

8.4 Exemption or exclusion clauses

A party to a contract may seek to avoid legal consequences of a breach of a term

thereof by inserting therein a paragraph or sentence to that effect. Alternatively, the
clause may be intended to limit the legal consequences of the breach rather than
avoidance thereof. Such sentences or paragraphs are known as "exemption
clauses". They are founded on the theory of freedom of contract and are common
in standard form contracts.

8.5 Judicial attitude

The English judges believed that a contract is an agreement which is freely entered
into by parties who are "sui juris" (i.e. legally at par). Consequently, a party to a
contract which contained an exemption clause was bound by it. After all, why did
he agree to enter into the contract despite the clause?

As a consequence of numerous cases that were brought before them, the English
courts formulated the following rules regarding exemption clauses:

i. An exemption clause must be an integral part of the contract. A clause

contained in a document which is essentially a receipt for money paid
will not be regarded as an exemption clause, as illustrated by: Chapleton
v. Barry Urban District Council.
ii. The particular clause in the document must have been brought to the
attention of the party affected by it before he entered into the contract. A
purported notification after the conclusion of the contract is not effective:
Olley v. Marlborough Court. However, the party seeking to enforce
 the clause may succeed if he proves that he had dealt with the other party
on previous occasions, and had given him similar documents: Spurling
v. Bradshaw.
iii. If the party affected by the exemption clause had signed it, he will be
bound by it, whether he did not read its contents before signing it:
L'Estrange v. Graucob. Exceptionally he may evade some of the
clause if, before signing the document, he had enquired as to what it
meant and was given verbal representations which modified the effect of
some of the written words: Curtis v. Chemical Cleaning & Dyeing Co.
iv. If the clause is ambiguous, it will be interpreted against the party who
inserted it and who is now relying on it. This is known as the "contra
preferentem rule" and is illustrated by: White v. John Warrick & Co.
Ltd.
v. As a general rule, an exemption clause cannot be relied upon by a third
party: Adler v. Dickson. This is due to the privity of contract rule.
vi. An exemption clause cannot be relied upon to exonerate a party from the
consequences of a fundamental breach of contract: Nichol v. Godts.

9 VITIATING ELEMENTS IN A CONTRACT

The validity of a contract may be vitiated in the following factors:

9.1 MISTAKE

This is a misapprehension of a tact or fact situation.

The general rule is that mistake is legally irrelevant: Bell v. Lever Bros.

9.1.2 Exceptions:

Mistake is legally relevant in cases of "operative mistake" (i.e. the mistake operates
to destroy the consensus that it is the basis of a contract and the parties are deemed
not to have agreed on anything).

A mistake may be -

i. Common Mistake: This may occur as follows:

(a) "Res extincta" - an agreement to sell goods which, unknown to buyer

and seller, have ceased to exist, e.g. Couturier v. Hastie - Contract
void.

NOTE: In McRae v. Commonwealth Disposals Commission (Australian

case which is "persuasive authority" in Kenya) it was held that the "seller"
who had agreed to sell goods which never existed at all was liable for breach
of contract: breach of the implied warranty that the goods actually exist.

(b) "Res sua" - an agreement to buy some property which, unknown to

both parties, already belong to buyer.
 Examples - Cooper v. Phibbs - an agreement to lease a fishery which,
unknown to the parties, was the property of the "lessee".

- Cochrane v. Willis.

2. Mutual Mistake:

This occurs if the parties misunderstood each other on a fundamental fact so

that there is actually no true agreement between them.

Example: Raffles v. Wichelhaus in which an offer was made in relation to

some property but misunderstood to refer to other property.
Contract void.

ii. Unilateral Mistake:

This is called "unilateral" because only one of the parties is mistaken. The
other party is aware of the mistake because he has fraudulently induced it.
This may occur as follows:

(a) Mistaken Identity:

The English cases relating to mistaken identity appear to be in conflict

regarding the effect of the mistake on the contract. These cases are:

(i) Ingram v. Little:

The English Court of Appeal held that the mistake rendered the
contract void - the court's reasoning being that the offer to sell the
car had been made to the person the seller believed he was
dealing with, but purportedly "accepted" by the rogue personally
present in front of the seller. So, in accordance with the rule in
Boulton v. Jones that an offer to A cannot be accepted by B, the
contract was void.

(ii) (a) Phillips v. Brooks)

The Court of Exchequer and the Court of Appeal held,

respectively, that the mistake rendered the contract
voidable (and not void).

(b) Lewis v. Avery

The court's reasoning in these latter cases was that the offer had
been made to, and accepted by, the same person who was
physically present before the offeror. The rule in Boulton v.
Jones was therefore in applicable and a contract of sale had been
formed between the parties.
 However, since the buyer had fraudulently misled the seller into
believing him to be a credit-worthy person whose cheque would
not bounce, the deception rendered the contract voidable at the
option of the seller.

However, the contract could not be avoided because an innocent

third party (the defendant) would be adversely affected by the
avoidance.

NOTE: Technically, Kenyan Courts are not bound by any of these

English decisions. Consequently, if the issue of the effect of
unilateral mistake pertaining to identity were to arise in a Kenya
Court, the court might:

(i) follow Ingram v. Little and declare the contract to be void;

or

(ii) follow Phillips v. Brooks or Lewis v. Avery and declare

the contract to be voidable.

Mistaken identity may also occur where the parties are not in each other's
presence.

A leading example is Cundy v. Lindsay. - in which the contract was held by

the House of Lords to be void as an instance of an offer meant for A being
accepted by B.

(iv) Documents Signed By Mistake

A person who has signed a document by mistake may escape liability

under the document if he can establish the defence of "NON EST
FACTUM". (it is not my deed). However, for this defence to succeed
the document signed must have been "radically", "totally", "basically",
"fundamentally" or "essentially" different from that which he believed it
to be: Saunders v. Anglia building Society.

Examples:

(i) Saunders v. Anglia Building Society

The defence of "non est factum' failed because the document

signed was a Transfer Deed and the document the lady thought
she was signing was also a Transfer Deed. The document signed
was therefore not "radically" or "fundamentally" different from
that she thought she was signing.

The signatory had made a mistake - i.e. a mistake as to the

contents of the document signed. The signatory thought that the
transferee named in the document was her nephew while in fact it
 was another person altogether i.e. the nephew's dishonest friend.
A mistake as to the contents of a document is legally irrelevant.

(ii) Foster v. Mackinnon

The defence of "non est factum" succeeded because the

document signed - a bill of exchange - was radically or
fundamentally different from that which the defendant thought he
was signing - an insurance document.

9.2 MISREPRESENTATION

A misrepresentation is a false statement of fact which was made by one party to a

contract to the other, at or before the time the contract was made, which induced the
other to enter into the contract. Where an agreement has been made on the basis of
a misrepresentation the law will sometimes grant relief. The relief obtainable
depends on whether the misrepresentation was innocent or fraudulent.

9.2.1 Elements of Definition

(a) A misrepresentation is a statement of fact. A statement of law, a

statement of opinion, such as an advertiser's 'puff' or a statement of
intention, is therefore not covered.

(b) The statement must be false. Clearly if the statement is true the
contracting party has no claim for redress.

(c) The representation must be made by one party to the contract to

the other. The essence of the complaint is that one party misled the
other, where the plaintiff has relied on false information from another
source, he cannot blame the contracting party.

(d) The representation must have induced the other party to enter the
contract. If he did not make the contract, or did not rely on the
representation. the plaintiff has no cause for complaint. Thus he cannot
plead that he relied on the misrepresentation if he did not know of it, or
if he knew it to be untrue.

(e) As a general rule silence does not amount to misrepresentation.

Silence

There are the following exceptions. Silence may amount to misrepresentation

where:

1. There is a positive duty to disclose, e.g. in fiduciary relationships and

contracts of insurance;

2. Where what has been said is true, but it amounts to a half-truth (e.g.
Dimmock v. Hallent where a vendor accurately reported that certain
 farms were let but omitted to say that the tenants had given notice).

3. Where disclosure is a statutory requirement

4. Where the original statement was true when made but had subsequently
become untrue (e.g. in With v. O'Fanagan the vendor of a doctor's
practice failed to disclose the fall in the receipts of the practice since the
original valuation).

Misrepresentation renders a contract void at the opportunity of the innocent

party.

9.2.2 Remedies

Where there had been a misrepresentation which has been acted upon, the
nature of the remedy will depend on whether it was made innocently or
fraudulently.

a) INNOCENT MISREPRESENTATION

An innocent misrepresentation is an untrue statement made in the

honest belief that it is actually true: Derry v. Peek. It is irrelevant that
the maker had no reasonable ground for his belief.

There is no remedy at common law for an innocent misrepresentation.

However, equity developed the remedy of rescission which will be
available to an aggrieved plaintiff unless it is rendered unavailable by
the circumstances listed below (under remedies for fraudulent
misrepresentation). Akerhielm v De mare. Indemnity for any direct
financial loss occasioned by the untrue statement. As was the case in
Whittington v Seale-Hayne.

b) FRAUDULENT MISREPRESENTATION

A fraudulent misrepresentation is an untrue statement which is made:

(a) knowingly, or
(b) recklessly, careless whether it be true or false, or
(c) without belief in its truth: Derry v. Peek.

In Derry v. Peek (1839): A company was formed which according to

its prospectus was to undertake the operation of steam trams in
Plymouth. The directors when they issued the prospectus honestly
believed that they would have no difficulty in obtaining the necessary
authority from the Board of Trade to run the trams. However, authority
was not given and the company was wound up. The plaintiff brought an
action against the directors for fraud. It was held by the House of Lords
that the directors honestly believed the truth of the statements they had
made therefore no action could lie for fraud. (The Directors' Liability
 Act 1890 was passed to reverse this decision with respect to directors.
This Act is now s.45 of the Kenya Companies Act. However, the
principle of the case still applies in their situations).

The party injured by a fraudulent misrepresentation in a contract must

prove that the following elements were present in the misrepresentation:

(i) There was a false representation of fact.

A statement of fact must be distinguished from a statement of opinion.

A statement "This car is a fantastic car!" is merely an opinion and not a
fact, and does not constitute a fraudulent misrepresentation.

There may, however, be fraud through a "suppressio veri", that is, a

suppression of the truth.

As Lord Cairns said in Peek v. Gurney (1873), "There must in my

opinion be some active mis-statement of the fact or at all events such a
partial and fragmentary statement of fact as that the withholding of that
which is not stated makes that which is stated absolutely false."

(ii) The statement was made deliberately with the intention of deceiving or
recklessly without caring whether it was false or true."

We have already seen above in the case of Derry v. Peek (1889) THAT
UNLESS AN ADMITTEDLY FALSE statement is made with the
knowledge that it is false, there is not fraudulent misrepresentation.

(iii) The false representation must actually deceive the injured party and
cause him to enter into the contract.

Horsfall v. Thomas (1862): The vendor of a cannon in which there was

a flaw, filled the flaw with some metal. The purchaser, who had not
inspected the article, burst the cannon upon its first discharge. It was
pointed out that as the purchaser had never inspected the cannon he had
not been deceived. "Deceit which does not deceive is not fraud."

(iv) The person making the misrepresentation must have intended that it
should be acted upon by the party who was actually misled by it. This
essential factor precludes a third party who, not being a party to the
contract, could not have been deceived, from making a claim. The
following case illustrates this.

In Peek v. Gurney (1873): A fraudulent statement had been made in

the prospectus issued by a company. The plaintiff, however, had not
purchased his shares direct from the company on the faith of the
prospectus but from a former shareholder. He therefore had no claim,
because he himself had not been misled by the fraudulent statement.
 (v) The injured party must actually have suffered some damage.

9.2.3 Remedies for fraudulent Misrepresentation

(a) The injured party may enforce the contract in spite of the fraud. It
should be noted that he himself is, of course, bound by the contract until
he takes steps to set it aside.

(b) If he does not wish to be bound by the contract, he may take steps to
rescind the contract. If he applies to the Court for an order of rescission
he must show that after discovering the fraud, he did nothing which
would show the intention of continuing with the contract. He must,
however, take his action to avoid the contract within a reasonable time,
otherwise as a result of his delay, an innocent third party may acquire
an interest in the property or the person uttering the fraudulent
misrepresentation may himself change his position vis-à-vis the injured
party, thereby precluding any possible rescission.

In the following circumstances, however, there can be no rescission:

(a) Delay

If third parties have already taken rights under the contract, bona fide
and for value, without notice of the fraud.

Kings Norton Metal Company v. Edridge (1897): W fraudulently

represented himself as being connected with a company "Hallam &
Co." which did not exist. He bought goods from the plaintiffs and sold
them to the defendant company. It was held that the original contract
between W and the plaintiffs was not vitiated by fraudulent
misrepresentation and the defendants had acquired a good title to the
goods.

(b) Affirmation
If the injured party after discovering the fraud takes any benefit under
the contract or in any other way affirms it, or is deemed to have
affirmed it.

(c) Restitution in integrum not possible

If it is not possible for the court to order a "restitutio in integrum", that
is, to order the parties to be placed in the position that they were in
before the contract was made. For example, A fraudulently
misrepresents a cheap watch to be one made of gold. B. relying on the
representation buys it, but on the way home the watch drops
accidentally and is destroyed. He is later told by a friend that the watch
is not made of gold. He is not able to rescind the contract since he is not
in a position to put things back to the original position. He may, of
course, still claim for the damages.
 (d) Third party rights
It should be pointed out that naturally the guilty party may not plead his
own wrongful action as grounds for rescinding the contract.

(e) The injured party may bring a court action for the return of any property
which the fraudulent party obtained from him. If a person brings an
action for the return of any property, he must himself be ready to restore
any property which he may himself have obtained under the contract.

(f) He may refuse further performance and should he thereupon be sued by

the other party for not carrying out the contract, he may defend the
action on the ground of the other party's fraud

(g) In any case, whether the injured party elects to affirm or rescind the
contract, he nonetheless has a right to sue in damages for the tort of
deceit. Any person who makes a false statement dishonestly commits
the civil wrong or tort of deceit and is liable if sued to pay damages to
the person he has deceived.

9.2.4 Silence as Misrepresentation

It is possible for a party who does not actually make a false statement
nevertheless to give a misrepresentation. The general rule is that he who
keeps silent makes no misrepresentation. As Lord Atkin said in Bell v. Lever
Bros. Ltd. (1932):

"The failure to disclose a material fact which might influence the mind of a
prudent contractor does not give the right to avoid the contract".

There are three sets of circumstances, however, in which a person who is

silent may incur legal liability, because he has failed to disclose a material
fact:

(a) Where his silence affects the accuracy of any previous representation.

(b) Where a confidential or fiduciary relationship exists between the

parties, the person in the position of trust is required to make full
disclosure of all the facts in making any contract with the other party
who relies on his advice.

(c) Where the contract requires the utmost good faith or, as the lawyers say,
in "contracts uberrimae fidei" e.g. contracts of insurance.

If full disclosure of the facts is not made, the other party has the right to
rescind the contract, e.g. London Assurance Co. v. Mansel.

9.2.5 DURESS

Duress is the use, or the threat to use, physical violence against the contracting party himself
or against near relations, such as wife, parent or child. Duress may be exerted either by the
 other contracting party or by a third person acting at his instigation or with his knowledge.
The threat or actual use of violence, or wrongful imprisonment, the wrongful threat to seize or
the actual seizure of property, and the threat to take criminal proceedings can all constitute
duress.

The threat must be illegal i.e. relate to a crime or tort.

In Cumming v. Ince (1847): A woman was a mental patient in a hospital
pending an enquiry. It was agreed that the woman should be released and that
at the same time she would give up certain deeds in her possession. The
agreement to give up the deeds was made under the fear of confinement in the
asylum and so it was not binding upon her.

The threat must be directed to the persons body

In Kaufman v. Gerson (1904): Kaufman coerced Gerson into making a
contract by threatening to prosecute Gerson's husband for a criminal offence
which he had committed. Gerson was held not liable upon the contract, as her
consent was obtained through duress.

It renders the contract voidable at the option of the innocent party.

In Maskell v. Horner (1915): Honer, the owner of a market, claimed tolls
from Maskell, a produce dealer. At first Maskell refused to pay, but he did
pay when Horner seized his goods, and continued to pay in the future, under
protest. Horner's right to tolls was subsequently declared illegal, and Maskell
recovered the payments made.

9.2.6 UNDUE INFLUENCE

"Undue Influence" is a technical phrase which denotes pressure exerted by

one person who has a moral superiority over another. Where such conditions
obtain, as for example, between solicitor and client, or trustee and beneficiary,
any contracts involving both parties to the relationship may show signs of a
stronger character influencing the weaker. It is said to exist where a party
terminates the others will thereby prohibiting his exercise of independent
judgement on the contract.

Undue influence usually arises where one party has contracted without
exercising his own judgement and free will, relying upon the advice of the
other party. It renders the contact voidable.

Where there is no fiduciary relationship between the parties, there is no

presumption of undue influence. In such a case, should it be claimed that
moral pressure has been brought to bear, the burden of proof is upon the
party who alleges that he acted under the undue influence of the other. As
was the case in Williams v Bayley.

Where parties have a special relationship e.g. parent/childhood , guardian/ward, advocate/client

doctor/patient, religious leader/disciple, undue influence presumed in favour of the weaker party. The
stronger party can disprove this presumption by evidence. .

In Smith v. Kay (1859): A young man who had just inherited a fortune was
introduced to a man several years his senior, who suggested that they should
 tour Europe together, the older man acting as the guide. After a long tour,
much of the younger man's fortune had disappeared or had been appropriated
by the older man. It was held that on the facts the elder man had exercised
undue influence.

The influence must have been exerted by the other party

The modern tendency is to consider duress and undue influence as the same,
and to define it as any moral or physical compulsion which influences the
decision of one party to a contract.

The party seeking to set aside a transaction on the grounds of duress or undue
influence cannot do so in the following circumstances.

(a) If third parties have acquired rights thereunder bona fide and for value.

(b) If there has been unreasonable delay. "Delay defeats Equity". The
facts of each case must determine what constitutes reasonable delay.

In Allcard v. Skinner (1887): A young lady entering the convent made

over her property to the convent. However, after a year she left the
convent but delayed for five years before applying to Court to rescind
her gift. It was held that she was defeated because of the unreasonable
delay. Once she had left the convent, any undue influence had ceased
and she should have taken prompt action in the matter.

Relief is afforded by Equity in cases where undue influence is claimed over

blind and illiterate persons.

10 DISCHARGE OF CONTRACT

10.1 A contract is said to be discharged when the obligations created by cease to bind
the parties that who area now freed from performance. It may be discharged .

10.1.1 BREACH, which occurs if there is a failure to perform it strictly as

was agreed. This is non-performance or tendering a defective. It is either
anticipatory or actual.

Example:
The Sale of Goods Act, s.13 provides that where a seller delivers less, or more, than the
quantity of goods agreed to be bought, the buyer may reject what is delivered and sue for
damages for breach. This is a codification of the common law rule of strict performance.
Breach does not discharge a contract but entitles the other party to treat it as repudiated.

10.1.2 PERFORMANCE as agreed under the contract.

.A contract is discharged by performance if both parties have dutifully

performed their obligations. Originally , at common law, a party could
only be discharged by performance if every part of the contract was
performed. Contractual obligations had to be observed to the letter.
This is the so called doctrine of “precise and exact” as exemplified by
 the decision in Cutter v Powell where Mrs Cutter was denied
compensation since her husband had not performed his obligations
precisely and exactly.

However, the harshness of this common law principle led to the

admission of a number of exceptions where in parties are discharged
without performing precisely and exactly, namely

(a) Substantial performance Marshides Mehta and Co ltd v Barron

Verhegen
(b) Partial performance If accepted by the other party. Sumper v Hedges
(c) Separable/divisible contracts Ritchie v Atkinson
(d) Prevented Performance Planche v Colburn
(e) Tender of performance
(f) Frustration of contract

EXPRESS AGREEMENT

Discharge of contract by agreement justified on the premise hat whatever is created by

agreement may be extinguished by agreement. Discharge by agreement may be
executory or executed. Where contractual obligations are executory a in either party has
performed discharge is bilateral where each party charges the other from performance.
Their mutual promises constitute consideration where contractual obligations are
executed i.e. one party has performed discharge is unilateral where the party that has not
performed is discharged by the other from performance. Unilateral discharge may take
any of the following terms;

(i) Waiver:
This may occur where the contract is still executory and one party is unable to
perform his part. The other party may release him from the obligations under the
contract by a deed (i.e. he waives his right to performance of the contract). A deed
is required in order to make the agreement binding, since there is no consideration
given by the released party.

(ii) Accord and satisfaction:

This occurs where the contract is discharged by a new contract between parties. An
example would be where A. agreed to sell a white PEUGEOT pick-up to B. He is
now unable to procure one and persuades B to accept a white DATSUN Pick-up,
and B. agrees to this.

(iii) Assignment:
This occurs where the rights of a contract are transferred to another party, as where
A lends B money to be repaid at the end of the month. Before the end of the month
A. tells B. to pay the money to C. when the time to pay comes. Assignments are
not recognized by the common law but may be effected under the Indian Transfer
of Property Act 1882 which is applicable in Kenya.
 (iv) Novation:
This occurs where the OBLIGATIONS or duties under a contract are transferred
from one party to another, as where A lends money to B to be repaid at the end of
the month. Before that time arrives, it is agreed that B's father (C) will repay the
loan.

10.1.4 (v) Frustration:

contract charged by frustration then performance f obligation is considered
impossible, illegal or commercially futile by reason of foreseen or extraneous
circumstances for which other party is to blame.

According to Professors Chesire and Fifoot, frustration is a relatively new legal concept which the
courts have yet to develop fully. It is therefore not possible to tabulate or classify all the
circumstances in which a contract may be discharged by frustration. However, the decided cases
illustrate that the contract may be discharged by frustration in one of the following ways:

(a) Destruction of subject matter of the contract before the time of performance
arrives,

Example: TAYLOR v. CALDWELL

(b) Non-occurrence of an event i.e. a new situation has arisen which renders it
impossible to perform the contract as originally anticipated.

Example: KRELL v. HENRY

(c) supervening illegality caused by a change in the law, or government

interference, so that it becomes illegal to perform the contract.

Example: METROPOLITAN WATER BOARD v. DICK, KERR & Co.

(d) Death or permanent incapacitation which renders it impossible for a party to a

contract to perform it because of unexpected or sudden illness.

(e) government intervention Where government acts or steps render performance

impossible
Metropolitan Water Board v Dick Kerr and Co.
(ADJUSTMENTOF THE RIGHTS OF THE PARTIES)

Example: CONDOR v. THE BARRON KNIGHTS BAND

10.1.5 EFFECT OF FRUSTRATION

The effects of frustration on a contract are detailed in the Law Reform

(Frustrated Contracts) Act 1943 of England which is applicable in Kenya
under the Law of Contract Act 1961.

The Act provides that when a contract is frustrated –

(a) The contract is terminated

(b) Money paid is recoverable.
 (c) Money payable ceases to be payable.

(d) The parties may recover expenses incurred under the contract, or retain
the relevant sum from money received if any.

(e) If any party to the contract has incurred expenses in part performance of
the contract which has conferred "a valuable benefit" on the other party,
he is entitled to payment of a reasonable compensation on a quantum
merit.

The doctrine of frustration does not apply:

i. Where the parties anticipated the would-be frustrating event and made
express provision for it in the contract, as in Clark v. Lindsay (1903).

ii. Where the frustrating event is self-induced, as illustrated by Maritime

National Fish Ltd. v. Ocean Trawlers Ltd. (1935).

iii. Where the contract is a lease or one for the sale of land - but there is some
doubt regarding this: Cricklewood Property and Investments Trust v.
Leighton's Investments Trust Ltd. (1945).

11 REMEDIES FOR BREACH OF CONTRACT

The remedies available to a party who sues for a breach of contract are divisible into:

(a) Common law remedies, and,

(b) Equitable remedies.

11.1 COMMON LAW REMEDIES

The only remedy available at common law for breach of contract is financial
compensation known as "damages".

11.2 Types of damages

Damages are classified into the following categories:

(a) Nominal damages which are awarded to a plaintiff to vindicate his right to
the performance of the contract. This occurs if the plaintiff has not suffered
any actual financial loss as a result of the breach of the contract.

(b) Actual or substantial damages which are awarded to the plaintiff as

compensation for actual loss occasioned by the breach. They are calculated,
generally speaking, in accordance with the rule in Hadley v. Baxendale.

It should however be noted that:

 (i) punitive or exemplary damages are not awarded by the court: Addie v.
Gramophone Co., and

(ii) damages cannot exceed the loss suffered by the plaintiff so that the
plaintiff finds himself in a better financial position than if the contract
had been properly performed: C. & P. Haulage v. Middleton.

(c) Liquidated damages which are provided for by the contract. But a sum
provided for by the contract will not be recoverable if it is "a penalty".

RULES THAT GOVERN THE MEASURE OF DAMAGES FOR BREACH OF

CONTRACT

(a) The purpose of a monetary award in damages for breach of contract is to compensate the innocent
party for the loss suffered. The essence is to put that party where it would otherwise have been if the
contractual obligations had been performed

(b) The loss of damage suffered by the innocent party must be proved. It is the duty of the plaintiff to
prove loss.

(c) The plaintiff must prove that he suffered loss or damage by reason of the defendant to breach of
contract. The plaintiffs loss must be traceable to the defendant in breach there must be a nexus
between the two failing which damages are said to be too remote and therefore irrecoverable as was
the case in Hadley v Baxendale. This case is authority for the proposition whenever a breach of
contract occurs, the plaintiff can only recover such loss as is reasonably foreseeable as likely result
from the breach. In this case the profits lost by reason of closure of the mill were too remote and
therefore irrecoverable.

(d) Where a party is in possession of special information about the contract but fails to act on it
whereupon the other party suffers loss, such party is liable for the loss. It was sol held in Victoria
Laundry (Windsor) Ltd v Newman Industries. In the Heron II where the plaintiff suffered a loss
of 4,011 by reason of a delay delivery of a consignment of sugar by the defendant (appellant) who
was aware that the respondent was a sugar merchant. It was held that the appellant was liable for the
loss as the same was traceable to the detour he made resulting in the delay.

(e) Where parties to a contract have already fixed the amount payable to the innocent party in the event
of breach, and a breach of contract occurs it is for the court to determine whether the sum so fixed is
payable as damages or is a penalty in which case it is not enforceable. In Dunlop Pheumatic Tyre
co v New Garage and Motor co Lord Dunedin formulated the presumption, courts of law rely on
in determining whether the sum fixed is liquidated damages or a penalty.

(f) Whenever a breach of contract occurs it is the duty of the innocent party to take such reasonable
steps as are necessary in the circumstances to reduce the loss it would otherwise have suffered from
the breach. The law imposes a duty on the innocent party to act reasonably. However, whether he
has so acted is a question of fact as illustrated by the decision in Musa Hassan v Hunt and Another.
In assessing damages the amount by which loss ought to have been reduced by the acts of the
innocent party is not reasonable from the defendant.

(g) As a general rule, courts of law do not award punitive damages for breach of contract.

The loss of damage

11.3 Distinction between liquidated damages and penalty.

Liquidated damages were defined by Lord Dunedin in Dunlop Pneumatic Tyre

Co. Ltd. v. New Garage and Motor Co. Ltd. as "a genuine covenanted pre-
estimate of damages" for an anticipated breach of contract. A penalty was defined
in the same case as "a stipulation in terrorem of the offending party".

The rules by which the courts distinguish liquidated damages from penalties were
formulated by Lord Dunedin in the above case as follows:

(i) Though the parties to a contract who use the words 'penalty' or 'liquidated
damages' may prima facie be supposed to mean what they say, yet the
expression used is not conclusive. The Court must find out whether the
payment stipulated is in truth a penalty or liquidated damages. This is
illustrated by Elphinstone v. The Monland Iron and Coal Co. Ltd.;
Cellulose Acetate Silk Co. v. Widnes Foundry.

(ii) "The essence of a penalty is a payment of money stipulated as in terrorem of

the offending party; the essence of liquidated damages is a genuine
covenanted pre-estimate of damage.

(iii) The question whether a sum stipulated is penalty or liquidated damages is a

question of construction to be decided upon the terms and inherit
circumstances of each particular contract, judged at the time of making the
contract, not as at the time of the breach.

(iv) To assist this task of construction various tests have been suggested, which, if
applicable to the case under consideration, may prove helpful or even
conclusive.
Such are:

(a) It will be held to be a penalty if the sum stipulated for is extravagant

and unconscionable in amount in comparison with the greatest loss that
could conceivably be proved to have followed from the breach.

(b) It will be held to be a penalty if the breach consists only in not paying a
sum of money, and the sum stipulated is a sum greater than the sum
which ought to have been paid.

(c) There is a presumption (but no more) that it is a penalty when a single

lump sum is made payable by way of compensation, on the occurrence
of one or more or all of several events, some of which may occasion
serious and others but trifling damage.

(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of

damage, that the consequences of the breach are such as to make
precise pre-estimation almost an impossibility. On the contrary, that is
just the situation when it is probable that pre-estimated damage was the
true bargain between parties.
11.5 Equitable remedies

The equitable remedies for breach of contract are:

(a) Injunction

This is an order of the court which restrains (i.e. prevents) a party to a

contract from doing something which, if done, will occasion a breach of the
contract. For example, if Onyango has agreed to sell some unique goods to
Kamau and promised to deliver them at end of the two weeks. On the third
day after the contract was formed, Kamau learns that Onyango has entered
into another contract with Abdullah and intends to deliver the goods to
Abdullah within two days. Kamau may institute legal proceedings in the
High Court with a view to restraining Onyango from delivering the goods to
Abdullah.
An injunction may also be issued in order to restrain a breach of a negative
stipulation in a contract. For example, if a tenancy agreement contains a
clause prohibiting the tenant from using charcoal for cooking in the rented
premise, an injunction may be issued to prevent him from doing so.

An injunction, being an equitable remedy, is not automatically available but is

issued at the discretion of the court. A common ground for the exercise of the
court’s discretion is the court's belief that it is "just and equitable " to do so.

(b) Specific performance

As can be deduced from its name, specific performance is an order of the

court which orders the defendant to perform the contract precisely (i.e.
specifically) as he had promised to do. It is decreed at the discretion of the
court but will not be decreed in the following cases:

(i) Where damages would be adequate compensation for the plaintiff.

(ii) Where the court cannot supervise performance of the contract, such as a
building contract.

(iii) Where the contract is one of personal services: Warner Bros v.

Nelson. However, the court may grant an injunction restraining the
defendant from doing something inconsistent with the contract, as in
Warner Bros v. Nelson, above.

(iv) Where the contract is a money-lending contract.

(v) Where one of the parties is an infant.

(c) Recession
(d) Trading
(e) account
(f) winding up
LAW OF AGENCY AND PARTNERSHIP

CONTENT

1. Read the Study Text provided below

2. Assigned readings: Chapters 6 and 7 of Hussain
3. Attempt the reinforcing questions given at the end of the lesson
4. Compare your answers with those given in lesson 9

STUDY TEXT

Contents

1. The law of agency

Definition of agency
Creation of agency
Effects of contracts made by agents
Rights and duties between principal and agent
Termination of agency
Professional agents

2. The law of partnership

Creation of partnership
The firm name
Relations of partners to third parties
Relations of partners to one another
Dissolution of partnership
Limited partnerships
 AGENCY AND PARTNERSHIP

1 AGENCY

1.1 SOURCES OF AGENCY LAW

The law of agency in Kenya is based on the common law rules which have been developed by
the English courts and the Factory’s Act 1989. The decisions of English courts are the primary reference
material for Kenyan courts, and law teachers in Kenya, regarding the principles and rules which constitute
the law of agency in Kenya.

1.2 DEFINITION OF AGENCY

There is no statutory definition of agency. However, "agency" may be described as

the legal relationship that arises when a person, called agent, is appointed or entitled
to represent another, called the principal, in a transaction with some other person(s).
According to I Halsbury's Laws of England, 3rd Edition, "an agent primarily means
a person employed for the purpose of placing the principal in contractual or other
relations with a third party and it is essential to an agency of this character that a
third party should be in existence or contemplated".

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

In the Canadian case of Timmins (Town) v Brewers' Warehousing Co. Ltd

(1962) Schroeder, J.A. stated, inter alia, that "the outstanding feature of an agent's
employment in a legal sense is that he is employed primarily to bring about business
relations between the principal and third persons, and this characteristic is perhaps
the most distinctive mark of the agent as contrasted with others not agents who act
in representative capacities".

The agent acts in such a way that a contract is created between the principal and the
third party who is usually a buyer or seller.

1.3 The law of agency prescribes the legal rules for determining-

(a) How a person may become an agent;

(b) The rights and duties between the agent and the principal;

(c) The relations between the agent and the third party; and

(d) The manner in which the relationship between the agent and the principal
may be brought to an end.

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

1.4 FORMATION OF AGENCY:

An agency may arise in the following ways:
1. Appointment (Contract) or agreement

This can be done in any way: orally, in writing or partly orally and partly in
writing.

Characteristics of Agency

i. The agent performs a service for the principal

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

Exception

An agent with authority to execute a deed on behalf of the principal must be

appointed by a deed called POWER OF ATTORNEY.

Note

A deed is usually required for transactions relating to sale or lease of land.

b. Estoppel

The basis of estoppel was explained by the court in Spiro v. Lintern as

follows:

"Where a man is under a duty - that is, a legal duty - to disclose some fact to
another and he does not do so the other is entitled to assume the non-existence
of the fact". In the context of the law of agency, a person who is under a legal
duty to inform a third party that the person purporting to act for him as his
agent is in fact not his agent but fails to do so may be "stopped" from
denying that the apparent agent is actually his agent, as in Spiro v. Lintern.

Elements of estoppel

Presentation needed to be acted on reliance upon the presentation

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

Another example of agency by estoppel is the liability of a partner for the

debts incurred by the firm after leaving the firm if the parties who knew him
to be a partner dealt with the firm without being made aware that he had left
it.

c. Ratification
 This is the adoption or confirmation by a person of a contract previously
entered into by another.

"Ratification" is the legal term which denotes the agency which arises if a
person adopts a transaction which someone had concluded for him as his
agent but without his express authority. The person who adopts the
transaction becomes a principal as if he had initially authorised it (i.e. the
ratification is said to be retrospective) P: Bolton Partners v. Lambert.

Agency by ratification can only arise if;-

1. The agent purported to act for a principal

2. The alleged principal was in existence at the time the contract was
formed: Natal Land Co. Ltd. v. Pauline Colliery Syndicate in
which it was held that the purported ratification was ineffective since
the company "ratifying" had not been incorporated at the time the
contract was formed.

3. The principal had capacity to enter into the contract.

4. The contract to be ratified is lawful. For example, a company cannot

ratify a contract which is beyond the objects in its memorandum of
association: Ashbury Rail Co. Ltd. v. Riche (orbiter dictum by Lord
Cairns).
5. The person whose act is to be ratified professed to be the agent of the
person seeking to adopt the contract. In other words, an undisclosed
principal cannot ratify a contract:

6. The alleged principal must have been made aware of all the material
facts of the relevant transaction before he decided to adopt the
contract. An apparent ratification which is induced by a partial
disclosure of relevant facts is of no legal effect.

7. The contract must be ratified within a reasonable time

d. Necessity

An agency of necessity may be either commercial or domestic:

(i) Commercial Agency of Necessity:

At common law, a person who is entrusted with "perishable" goods of

another is entitled, in certain circumstances, to do certain things in
relation to the goods as if he had been expressly authorised to do so by
the owner. This will be so if:

(a) A genuine emergency arises and the goods are in danger of perishing or being
destroyed completely unless the contemplated action is taken.

Examples
 In Couturier v. Hastie

The captain of the ship had to sell the corn which had become
over-heated while the ship was in transit. The corn would have
been destroyed or become commercially useless if not sold
immediately.

In G.N. Railway v. Swaffield

The horse might have died from hunger or exposure to extremely

cold weather at night if the railway company did not make
arrangements for stabling it for the night.

Accordingly, no "necessity" arises if there is no emergency.

In Prager v. Blatspiel Ltd. the defendants were held liable for

conversion because there was no "emergency" to warrant the sale
of the skins. Skins do not get destroyed if well kept.

(b) Impossible to communicate with the owner of the goods.

In Springer v. G. W. Railway the defendants were liable for

conversion by selling the tomatoes without the owner's
instructions. The railway company could have communicated
with the owner of the tomatoes ad informed him of what was
happening so as to obtain instructions on what was to be done, but
they did not do so. No "agency of necessity" therefore arose.

(c) Good faith

It was actually necessary to do what was done and the action

taken was prompted by a desire to prevent the owner of the goods
from incurring a financial loss as a consequence of an imminent
perishing of deterioration of the goods.

(ii) Domestic Agency of Necessity

A married woman who has been constructively or actually deserted by

her husband has authority at common law to take necessities on credit
for her personal use but as her husband's agent. The husband will have
to pay for the goods as if he had expressly told her to take them on
credit.

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

Broadly agents are either general or special depending on the scope of their authority.
An agent engaged to perform a task in the ordinary course of his business as an agent is deemed general. An
agent is special if engaged to perform a task outside his ordinary course of business as an agent. However
specific agents include:

• Factors
• Brokers
• Auctioneers
• Del credere agent
• Advocates
• Ship captain or master

e. Presumed Agency or from Cohabitation

A woman who is living with a man is deemed to be his agent for purposes of
obtaining necessaries for the family; marriage is not essential.

"Necessaries" will depend on the standard of living set by the husband and
not on the family's actual income. An example is Nanyuki General Stores v.
Mrs Peterson in which the plaintiffs failed to recover the price of the goods
they had sold to the defendant. They thought that she was contracting with
them personally but the court held that she was, in law, contracting for her
husband even though she did not tell them so expressly. They should have
implied this from the fact that she was a "Mrs".
Requirements

Rehabilitation domestic establishment necessaries

This authority is also possessed by a woman who is living with a man

ostensible as his wife but is in fact his mistress, because it is practically
impossible for the businessman to differentiate a wife from a mistress - that
being largely a legal question.

The authority will cease if:

(i) The husband has forbidden the wife to take goods on credit. It does not
matter that the seller was not aware of the prohibition.

(ii) The husband had expressly told the supplier not to supply goods on
credit to the wife.

(iii) The wife had been given adequate allowance for necessaries or
clothing. An example is Miss Gray Ltd. v. Cathcart.

(iv) The goods fall outside the technical definition of "necessaries" and are
legally regarded as luxuries.
DUTIES BETWEEN PRINCIPAL AND AGENT

1.5 OBLIGATIONS OF THE AGENT

The duties of an agent to the principal are:

(a) Care and skill

.To exercise due diligence in the performance of his duties and to apply any
special skill which he professes to have.

"Diligence' primarily means that the agent, when working for the principal,
must exert the same effort, or show the same enthusiasm, as he would have
exerted or shown when acting in his own affairs.

An agent appointed to sell must endeavour to obtain the highest price

possible, while an agent appointed to buy must endeavour to buy at the lowest
price possible. For an illustration, read: Kepple v. Wheeler.

(b). Account

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

(c). Estoppel/respect for principals’ title

Not to become principal as against his employer or principal. In particular, an

agent appointed to buy property must not sell his own property to the
principal and an agent appointed to sell must not buy the property:
Armstrong v. Jackson.

(d). Obedience
(e). Bonafide

(f). Separate accounts

(g) Keep the principal informed

 A breach of the duty renders the contract voidable at the option of the
principal.

(h). Not to make any secret profit :If he does:

(i) The principal may recover the amount of the secret profit from him.

(ii) The principal may refuse to pay him the agreed commission e.g.
Andrews v. Ramsay & Co.

(iii) The principal may dismiss him without notice, if notice is required to
terminate his agency.

(iv) The principal may sue the agent receiving and the third party giving the
secret payment for damages suffered.

(v) The principal may repudiate the contract, whether or not the secret
payment had effect on the agent.

i. Personal performance of non-delegation

Not to delegate his authority, unless the delegation is in the ordinary way of
business or is authorised by the principal. This rule is expressed in the Latin
maxim "delegatus non potest delegare".

j Confidentiality

k. Not to disclose any confidential information or document entrusted to him by

the principal.
Performance

1.6 DUTIES OF THE PRINCIPAL:

The duties of the principal to the agent are:

a Remuneration

To pay the agreed commission when it becomes due, strictly in accordance

with the terms of the contract of agency. (An agent in possession of the
principal's goods may retain the goods as security for payment of outstanding
commission. This is called a lien (general or particular) but it does not confer
power of sale of the goods in question).

b Indemnity

To indemnify the agent by refunding to him any out of pocket expenses

personally incurred in the bona fide execution of his mandate. e.g. Great
Northern Railway v. Swafield.
CONCEPT OF AUTHORITY

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

There are three types of authority namely;

(a) Real or factual

This is the authority, which in fact is given to the agent by the principal. It may be by
word of mouth or in written. This authority may be:

(i) express
(ii) implied
(iii) customary or usual

(b) Obstensible or apparent

This is the authority which in fact the agent has not been given by the principal but which
he appears to have by reason of the principal’s conduct. It is based on the conditions of
the principal such that conduct determines scope. It is the authority exercised by an agent
create by estoppel.

(c) Resumed authority

This is the authority which the law deems the agent to have. It is conferred upon the
agent by law. It is not given by the principal nor is it based on the principals’ conduct. It
is the authority exercised by agents of necessity and from cohabitation.

1.7 Relations between agent and the third party.

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

1. If the agent acted for a disclosed principal by informing the third party that
he was an agent acting for a principal (whether named or unnamed) the
general rule is that he drops out of the transaction as soon as his offer has
been accepted or conversely, he has accepted the third party's offer.

He is not personally liable under the contract and cannot personally enforce it
in the event of its breach. Only the principal can sue or be sued thereunder.
 Exceptions

An agent would be personally liable if:

(a) He executes a deed in his own name: Appleton v. Binks (1804)

principal does not exist or has no capacity.

(b) He signs a bill of exchange in his own name without indicating that he
is acting as an agent.

(c) He contracts as agent but is in fact a principal.

(d) If the custom of particular trade makes him liable.

If an agent lacks authority or exceeds his authority (express or implied) he

will be liable to the third party for "breach of warranty of authority": Yonge v.
Toynbee (1910).

2. If the agent acted for an undisclosed principal (i.e. a principal whose

existence the third party was unaware of because the agent did not say that he
was contracting as agent):

(a) If the third party fails to perform the contract he may be sued by either
the agent or the principal (but not both).

(b) If the contract is breached by the principal the third party may:

(i) sue the principal, or

(ii) sue the agent. He cannot sue both, and cannot abandon
proceedings against one in order to sue the other.

1.8 Termination of agency

An agency relationship may come to an end by:

I. Mutual agreement, or consent

II. withdrawal of consent
III. Performance,
IV. Bankrupcy of the principal
V. Frustration
VI. Death of the principal (it being irrelevant that the agent was unaware of the
death): Kennedy v. Thomassen.
VII. Insanity of the principal: Yonge v. Toynbee.
VIII. Lapse of time
2 PARTNERSHIP LAW

Section 3(1) of the Partnership Act defines partnership as:

"The relation which subsists between persons carrying on a business in common with a view to
profit".

Elements of the definition

a) It is an association of persons

b) There must be a "business" carried on. The term "business" has a wide meaning and is not
confined to commerce, but covers solicitors, accountants, estate agents, etc. as well.

c) The business must be carried on "in common". The partners should jointly participate in the
running of the business though a person may be a sleeping partner. For this purpose, a
partner is regarded as an agent of the other partners.

d) The business must be carried on "with a view to profit". It is not necessary that a profit
actually be made, but that the business be run with the object of making one. This provision
excludes charitable organisations.

2. Rules for Determining whether a Partnership exists

The sharing of profits is prima facie evidence of partnership, but this evidence can be refuted and the Court will not
readily hold a person to be a partner on this evidence alone. Not only must he share in the profits, but he must act
as a partner, or the business of the firm must be carried out on his behalf or on his instructions.

In the case of Cox v. Hickman, a debtor assigned his business to trustees for the benefit of his
creditors. The business was carried on by the trustees in order to pay off the creditors out of the
profits of the business.

It was held that "the real test of partnership liability is not participation in the profits, whether trade is carried on by
persons acting as the agents of the persons sought to be made liable, and that the creditors were not partners in the
business."

In all cases, the ultimate test will be the intentions of the parties, and whether or not they intend to have the rights of
partners "inter se". If they do, they will be partners, and liable as such, even if the agreement expressly stipulates
that they are not partners.

Section 2 of the Partnership Act lays down the chief rules for determining whether or not a partnership really exists.
These rules are as follows:

(a) Joint tenancy, tenancy in common, joint property, common property or part ownership
does not of itself create a partnership, irrespective of whether the tenants or owners share
any profits made by them. This is because no business if carried on.

(b) The sharing of gross returns does not of itself create a partnership, whether the persons
sharing such returns have or have not a joint or common right of interest in any property
from which the returns are derived. Technically, "gross returns" are not profits.
(c) The receipt by a person of a share of the profits of a business is prima facie evidence that
he is a partner in the business; but the receipt of such a share, or of a payment contingent
on or varying with the profits of a business, does not of itself make him a partner in the
business, and in particular:

(i) The receipt by a person of a debt or other liquidated amount by instalments, or

otherwise , out of the accruing profits of a business does not of itself make him a
partner in the business or liable as such. This is so because he is a creditor.

(ii) A contract for the renumeration of a servant or agent of a person engaged in a

business by a share of the profits of the business does not of itself make the servant
or agent a partner in the business or liable as such. This is because the person is an
employee.

(iii) A person, being the widow or child of a deceased partner and receiving by way of
annuity a portion of the profits made in the business in which the deceased person
was a partner, is not by reason only of such receipt a partner in the business or liable
as such.

(iv) The advance of money by way of a loan to a person engaged or about to engage in
any business, or a contract with that person that the lender shall receive a rate of
interest varying with the profits arising from carrying on the business, does not of
itself make the lender a partner with the person or persons carrying out the business
or liable as such. Provided that the contract is in writing, and signed by or on behalf
of all the parties to it. This is so because he is a creditor.

(v) A person receiving by way of annuity or otherwise a portion of the profits of a

business, in consideration of the sale by him of the goodwill of the business, is not
by reason only of such receipt a partner in the business or liable as such. This is so
because be is a seller of goodwill.

2.2 FORMATION AND THE PARTNERS

The Partnership Act does not prescribe rules for the formation of a partnership.
Consequently, a partnership may be formed :

(a) Orally; or

(b) Simply by the actions of the persons concerned, if the y are acting as if they were
partners; or

(c) By simple agreement in writing; or

(d) By a deed i.e. an agreement under seal, signed by the persons who agree to become
partners.

2.3 Capacity to Become a Partner

 Capacity to enter into partnership is co-extensive with capacity to contract. An infant may
enter into a contract either before or within a reasonable time of reaching the age of 18:
Partnership Act, S.13

A corporation may enter into a contract of partnership provided such act is within the
powers if its Memorandum of Association, and such a partnership may be with an
individual or with another corporation.

2.4 Illegal Partnerships; Number of Partners

A partnership will be illegal in the following circumstances:

(a) If it is formed for an illegal purpose, such as a purpose which is contrary to public
policy.

(b) Where it consists of more than 20 members.

By virtue of Section 389 of the Companies Act, no association consisting of more

than twenty persons shall be formed for the purpose of carrying on a business with
a view to profit unless it is registered as a company under the Act, or is formed in
pursuance of some other Act of Parliament or of letters patent. For the effects of a
breach of this provision, read Fort Hall Bakery Supply Co. v. Wangoe.

2.5 The Firm Name

Legally, the firm name is merely a convenient way of alluding to the existing partners.
An authority to lend to a firm does not authorize a loan to that firm, when the partners
have changed. But copyright can be registered in a firm name; the firm name will be
protected; partners can sue or be sued in the firm name, though they must appear in
person.

Every firm having a name which does not disclose the true surnames of all partners, must
be registered under the Registration of Business Names Act. In the case of such firms, the
full names of all partners must be printed on every catalogue, show card, circular and
business letter sent out by the firm. Also, if any partner is not a Kenyan, his nationality
must be shown. If he has been naturalized, his original nationality must be shown.

Under the Registration of Business Names Act, the Registrar must be furnished with the
following particulars:

(a) The business name.

(b) The general nature of the business.

(c) The principal place of business.

 (d) The present Christian name and surname and any former name and surname of
each partner, and their usual residence.

(e) The nationality of each partner.

(f) Any other business occupation of the partners.

(g) The date of the commencement of business.

2.6 RELATIONSHIP OF PARTNERS INTER SE

1. Various terms are in use to denote the different kinds of partners. The most
important of these terms are as follows:

(a) A General Partner

One who not only actively participates in the business, but who also can be
held liable for the total debts of the firm. He is a partner in the fullest possible
sense of the word.

(b) A Limited Partner

One whose liability is limited to the amount of capital he has invested in the
firm. He takes no part in the management of the business, and if he does, will
lose his "limited liability" in respect of that transaction.

(c) An Active Partner

One who takes an active part in the affairs of the partnership.

(d) A Sleeping Partner

One who does not take any active part in the affairs of the firm. He will have
capital invested in the business, but always remains in the background
himself. Such a partner is also known as a dormant partner.

2.7 The Articles of Partnership

Although a partnership need not be formed by written agreement, it is usual for `Articles
of Partnership' to be drawn up, signed by all the partners. Such Articles will govern the
relationship of the partners "inter se" and will constitute a contract between them.

The Articles of Partnership will generally contain the following eleven clauses:

(a) The nature of the business.

(b) The capital and property of the firm, and the respective capitals of each partner.
 (c) The sharing of profits and losses.

(d) The rules as to interest on capital, or drawings.

(e) The provision for proper accounts, and the auditing thereof.

(f) The powers of each partner.

(g) The grounds for dissolution.

(h) The method of determining the value of goodwill on retirement or death.

(i) The method of computing the amount payable to an outgoing or deceased partner.

(j) The power of expulsion.

(k) The arbitration clause.

2.8 Statutory Provisions in Applicable in the absence of a deed

It has been stated that the rights and relations of partners to one another are governed by
the contents of the Articles of Partnership." If any point is not dealt with in these Articles,
then the Partnership Act applies. Section 28 of the Act deals with the chief items, and
contains the following rules:

(a) Partners are entitled to share equally in the profits and capital of the business. They
must also contribute equally toward the losses, whether these are capital losses or
otherwise.

(b) Every partner must be indemnified by the firm in respect of personal liabilities
incurred and payments made by him in the ordinary course of the firm's business or
in respect of anything necessarily done for the preservation of the business or
property of the firm. This is a partner's right as an agent of the firm.

(c) Where a partner advances money to the firm, for business purposes, over and above
the amount of his agreed capital, is entitled to interest on the capital he has
subscribed.

(d) A partner is not entitled, before the ascertainment of profits, to interest on the
capital he has subscribed.

(e) Every partner can take part in the management of the firm's business, but no partner
is entitled to remuneration for such services. Where, however, extra work has been
caused by the actions or conduct of a certain partner, then, as a general rule, other
partners are entitled to some remuneration in respect of this extra work.

(f) No new partner may be introduced without the consent and agreement of all the
existing partners.
 (g) Any difference in connection with ordinary matters in the partnership may be
decided by a majority of the partners. No change may be made in the nature of the
partnership unless all the partners consent.

(h) The books of the partnership are to be kept at the principal place of business of the
partnership and every partner is to have access to them for the purpose if inspecting
them, or of taking copies.

UTMOST GOOD FAITH

A partnership is a contract of the utmost good faith. Each partner is entitled to utmost gaviness
rom his co-partners. This equitable principle is manifested in the following ways.

(a) A partner must mot without the other partners engage in any business in direct
competition with the firm’s business.

(b) A partner can only be expelled from the firm in good faith

(c) Any secret profit made must be accounted to the firm

(d) A partner must disclose any personal interest in contracts entered into on behalf of the
firm.

2.9 Assignment of Share in Partnership

As has been stated, no new partner may be introduced without the consent of all other
partners, and accordingly no partner can assign to another person his position as partner in
the firm. He may, however, unless the Articles of Partnership contain a clause to the
contrary, assign the right to receive his share of the profits of the business.

Such assignment may be absolute or by way of redeemable charge or mortgage to a third

party. The assignee however, takes the partnership share subject to the rights of other
partners and of the partnership creditors of the assigning partner.

The assignee may take no part in the management of the firm and is not entitled to inspect
the books or accounts of the partnership. He is merely entitled to receive that share of the
profits which would otherwise have gone to the assigning partner. As to how this share is
arrived at, the assignee must accept the accounts as prepared by the continuing partners.
In the event of winding-up of the firm, the assignee is entitled to receive that share of the
assets which otherwise would have gone to the assigning partner.

Note that the assignment, by a partner, of his share in the partnership is not, of itself, a
reason for dissolving the partnership. This, of course, is subject to any clause to the the
contrary which may be contained in the Articles of Partnership. In the event of a partner
allowing his share to be charged, under a Court Order, for his private debts (i.e. a
compulsory charge), the other partners may terminate the partnership.
2.10 PARTNERSHIP PROPERTY

Partnership property comprises all property originally brought into the partnership or
acquired for the purposes of the firm's businesses. Not all property used by the firm is
necessarily partnership property but may be the private property of one of the partners;
prima facie, however, property bought with money belonging to the firm will be deemed
to be partnership agreement.

Although the partner may claim a 'share' in the partnership property (prima facie, an equal
share), the property is indivisible and must be regarded as held on trust for sale, the
partners' entitlement being to share in the proceeds of sale.

Partnership property cannot be made the subject of a writ of execution issued against an
individual partner in respect of his private debts (though it may be charged on a writ of
execution made against the firm). The Court can, however, make an order whereby an
individual's interest in the firm can be charged for the benefit of his creditors, which will
operate as a compulsory assignment of that partner's share as described above.
2.11 AUTHORITY OF PARTNERS

1. Articles of Partnership

The relations of partners to one another are governed by the Articles of Partnership.
As third parties are not permitted to inspect these Articles, the Court does not
presume that third parties know the contents of the Articles. (Contrast this with the
Articles of Association of a limited company, which can be inspected by anyone).
For that reason every partner is deemed to be the agent of the firm and of the other
partners in the firm. This, is the rule no matter what the Articles of Partnership
may state with regard to the relation of partners to one another.

2. Exceptions:

The rule just stated is a general rule, of course, and there are a few exceptions to it.
The chief of these exceptions are as follows:

(a) If a contract is made by a partner with a third person and that third person is
unaware of the existence of the partnership, then the other partners cannot be
bound, provided they have forbidden the contracting partner to act for them.

(b) If a partner executes a deed, neither the firm nor the other partners will be
bound unless the contracting partner was himself given authority by a deed
(i.e. a power of attorney). This is in accordance with the Law of Agency.

(c) If the authority of a partner has been canceled by the other partners, and that
particular partner purports to contract with a third party, then the third party
concerned cannot hold the firm liable if he knew of the cancellation of
authority then the firm can be held liable.

(d) If a partner, without special authority, gives a guarantee or signs a bill of

exchange, makes or endorses a promissory note, borrows money, or pledges
goods - in the name of the firm - then the firm will not be bound as these acts
 are not in the usual course of the business of the firm. With a trading firm,
however, any partner may bind the firm on bills of exchange, promissory
notes, or on a contract to borrow money on behalf of the firm. Remember
that this applies to trading firms only, i.e. firms whose business is the buying
and selling of goods.

Higgins v. Beauchamp: Beauchamp and X carried on a partnership business

as owners and managers of cinemas. The articles of partnership forbade the
partners to borrow money on the firm's behalf. X borrowed money from
Higgins on the firm's behalf. The firm was held not liable, as it was not a
trading firm; X had therefore no implied authority to borrow on the firm's
behalf.

3. Ostensible Authority

A distinction is something drawn between the actual and ostensible authority of a partner.
Actual or express authority is that conferred upon a partner by the terms of a partnership
agreement. Ostensible or apparent authority is that with which a partner is vested by
virtue of his status as a partner. Apart from any express authority, the law assumes that a
partner has an ostensible authority to carry out all acts necessary for transacting the
business of the firm in the usual manner employed by businesses of the same nature as
that of his particular firm.

2.12 LIABILITY OF PARTNERS

1. General

The liability of a general partner extends to the whole of the debts of the
partnership. He is jointly with the other partners. For this reason a creditor can
pursue one of two courses.

Firstly, he can proceed against the partners jointly i.e. in the firm name. If he
obtains judgement against the firm, the debt must be satisfied out of the assets of
the firm. If, however, the assets of the firm are insufficient, then the creditor can
look to the private assets of the partners in order to satisfy his debt.

Secondly, the creditor can proceed against any individual partner. If he obtains
judgement against a certain partner and this judgement cannot be satisfied out of
the private property of that partner, then the creditor cannot proceed against the
remaining partners.

The creditor must pursue either one course or the other. If he pursues the second
course described above, the partner against whom the judgement is obtained will be
liable to pay the full amount. He has a right to call upon the other partners,
however, to contribute the shares which they should bear.

2. Liability of Incoming and Outgoing Partners

(a) Incoming Partners

 Unless a new partner makes a special agreement to the effect that he will take
over the liability in respect of the firm's debts at the time of his joining the
firm, them he cannot be held liable for such debts. In the absence of such a
special agreement the new partner can be held liable only in respect of debts
incurred after he became a partner in the firm: Section 21(1).

(b) Retiring Partner

Unless there is a special agreement to the contrary, a retiring partner can be

held liable only in respect of debts incurred before his retirement. If,
however, the business of the partnership is being continued by the remaining
partner of partners with or without the addition of a new partner or partners,
then a retiring partner will be liable in respect of debts incurred after his
retirement, unless notice of his retirement is given. Considering (a) and (b)
together, it is important that you should know that an agreement may be made
between the creditors and the firm whereby the former agree to discharge a
retiring partner from all liability: S.2 (iii). However, there must be valuable
consideration to support such an agreement. The mere agreement of the
remaining partners to be held liable for all debts is not sufficient for this
purpose, as they are already liable. Where a new partner is introduced,
however, and he agrees to be held liable for all the firm's debts (including the
debts incurred before his introduction) then this will be considered as a
valuable consideration. Remember, however, that these rules apply only to
express agreements with creditors. Such an agreement is almost
impracticable except in cases where the number of creditors is small.

Death of a Partner

On the death of a partner, where the partnership is terminated by the event,

the private property of the deceased partner is available to the creditors of the
firm. First, however, the claims of the private creditors must be met out of the
private property. Any surplus remaining goes to satisfy the debts of the
partnership which remain unpaid.

Liability in Tort

Where a partner commits a tortious act, the remaining partners are jointly and
severally liable with him, provided they authorised the act either expressly, or
by implication, where the act was done within the ordinary course of the
firm's business: S. 14.

For instance, in the case of Hamlyn v. Houston & Co. a partner in a firm
bribed the agent of another firm for the purpose of obtaining useful
information for the partnership. It was held that his co-partners were jointly
and severally liable, since the obtaining of useful information was in the
ordinary course of business.

Liability by Estoppel
 Anyone who represents himself or allows himself to be represented, whether
by words, writing or conduct, as the partner of another person (or persons),
will be liable as a partner with such person (or persons).

Where, however, after a partner's death, the partnership business is continued

in the old firm-name, which include the deceased partner's name, it will not of
itself make the deceased partner's estate liable for any debts contracted after
his death.

2.13 TERMINATION OF PARTNERSHIP

The Articles of Partnership will contain, as a general rule, the regulations with
regard to the termination of the partnership. In the absence of, or subject to,
these regulations, the partnership terminates in the following ways:

(a) lapse or effluxion of time

When the fixed time (if any) stated in the Articles of Partnership, or
partnership agreement, has expired.

(b) Performance

If the partnership was entered into for one adventure, transaction or

undertaking, by the completion of that adventure, transaction or
undertaking.

(c) At will

If the partnership is a partnership "at will" (i.e. for no fixed period), by

one partner giving notice to the remaining partner or partners, of his
intention to terminate the partnership.

(d) Consent

By the mutual consent of all the partners.

(e) Bankruptcy

By the bankruptcy or death of any partner.

(f) Changing of a partner

If a partner allows his share to be charged under a Court Order for his
private debts.

(g) Illegality
 If any event occurs which makes the business of the partnership illegal.
This rule applies, irrespective of the contents of the partnership
agreement which is "frustrated".

2. Dissolution by the Court

Section 39 of the Act prescribes the circumstances which the court will decree
the compulsory dissolution of a partnership. They are:

(a) Lunacy or unsoundness of mind

If a partner becomes a lunatic or of permanently unsound mind.

(b) Permanent incapacitation

If a partner becomes permanently incapable of performing his

partnership duties.

(c) Prejudicial acts of a partner

Where a partner has acted in a manner which is prejudicial to the

carrying on of the firm's business, and his continued association with
the firm would bring the firm's name into disrepute.

(d) Wilful and continuous breach

Where a partner is guilty of a wilful breach of the partnership contract.

(e) Losses

When the firm's business can carried on only at a loss.

(f) Just and equitable

When any circumstances arise which render it fair and equitable that the
partnership is dissolved. In Re Yenidge Tobacco Co., the partners
refused to speak to each other; one partner petitioned the Court for a
dissolution, which was granted. A state of mutual hostility is
incompatible with partnership.

3. Recovery of Premium: S. 44

Where one partner has paid a premium to another on entering into a

partnership for a fixed term, and the partnership is dissolved before the
expiry of the term, otherwise than by the death of a partner, the Court may
order the repayment of such part of the premium as it thinks just. The Court
will have regard to the terms of the partnership contract and the length of time
during which the partnership has continued. In the absence of special
circumstances, the proportionate part to be returned is that amount which
 bears the same ratio to the original premium as the unexpired term bears to
the original term.

The partner has no claim to repayment:

(a) If the dissolution is, in the opinion of the Court, due wholly or chiefly to
his misconduct; or

(b) If the partnership is dissolved by an agreement containing no provision

for a return of any part of the premium.

4. Distribution of Assets

As a general rule the Articles of Partnership contain full regulations as to the

rights of partners in an dissolution. In the absence of such provisions,
however, the following will apply:

The assets or property of the firm must be applied in paying off the creditors
of the firm. The assets remaining are to be applied in paying off the partners
the amounts which are due to them, as partners (Section 39). The assets of
the partnership, together with any amounts contributed by partners to make up
a deficiency, are to be distributed as follows:

(a) In paying off all creditors of the firm who are not partners.

(b) In paying off rateably any loans made by partners to the firm - such
loans being distinguished from capital.

(c) In paying rateably to the partners the amounts due to them in respect of
capital.

(d) If any surplus remains it is to be shared among the partners in the

proportion in which they share profits (Section 48).

The rule in Garner v. Murray: Three partners, G, M and W, agreed to

contribute in unequal proportions to the partnership capital and to share
profits equally. There was a loss on realisation, and, on the dissolution of the
partnership, W, being insolvent, could not make good the deficiency on his
capital account. It was held that G and M, before being paid rateably what
was due to them in respect of capital, must each contribute an amount to make
good the deficiency of W, in proportion to the last agreed balance on their
capital accounts.

2.14 LIMITED PARTNERSHIPS

By virtue of the Limited Partnerships Act, the liability of certain partners may be
limited to a certain extent. The chief provisions of the Act are as follows:

(a) The number of partners in a limited partnership is restricted to twenty.

(b) In a limited partnership there must be one, or more, general partners who
are liable for all the debts and other liabilities of the firm.

(c) In addition to the general partner or partners, there will be one or more limited
partners. Limited partners are persons who, at the property taken at a certain
value, as capital, and are not liable for the debts and other liabilities of the
firm beyond the amount of this contribution. This form of "limited liability"
has a different meaning from that which prevails in registered companies.

(d) Concerning the Capital of the partnership, a limited partner cannot, during the
lifetime of the firm withdraw or receive back from the firm his contribution or
any part of it.

(e) The death or bankruptcy of a limited partner does not cause the dissolution of
a limited partnership.

(f) Similarly, the lunacy of a limited partner is not a cause of dissolving a limited
partnership, unless the share of that partner cannot be separated from the
assets of the firm by any other method.

(g) A limited partner has no right to participate in the firm's management. If he

does, he will be deemed to be a "general partner" with the consequent
"unlimited liability" - in respect of transactions that he engaged in.

The Partnership Act and the general rules of partnership law apply to limited
partnership, except where these do not agree with the Limited Partnership Act, in
which case the rules laid down in the latter Act over-ride those laid down in the
former.
REINFORCING QUESTIONS
1. (a) "It is always necessary to communicate notice of acceptance".

Explain whether or not you agree with this statement.

(b) A wrote to B offering to sell him a consignment of goods. In the letter, he asked B
to telephone his decision to C, A's agent. Is there a valid contract between A and B
in each of the following situations:

i. B does not telephone C but writes to A accepting his offer. The letter is
delayed and A sells the goods to D.

ii. B sends a telex to A accepting his offer.

2 (a) Describe the duties which an agent owes to his principal.

(b) Philip instructs Steven to sell his house and agrees to pay him £200 commission on
completion. Steven sells the house and on completion is paid his commission by
Philip.

Philip subsequently discovers that Steven has also been paid a commission of £100
by the purchaser.

Advise Philip

3 Compare and contrast partnerships and private limited companies.

Check your answers with those given in Lesson 9 of the Study Pack
COMPREHENSIVE ASSIGNMENT No.2

TO BE SUBMITTED AFTER LESSON 4

To be carried out under examination conditions and sent to the Distance Learning Administrator
for marking by the College.

EXAMINATION PAPER. TIME ALLOWED: THREE HOURS. ANSWER FIVE

QUESTIONS

ALL QUESTIONS CARRY EQUAL MARKS.

1. (a) Draw a diagram showing the various Kenya courts.

(b) Explain the civil jurisdiction of the Kenya courts.

2. What are the advantages, from a legal point of view, of converting a business carried on
as a partnership into a registered company limited by shares?

3. Write explanatory notes on the contractual capacity of infants.

4. (a) Distinguish between executed, executory and past consideration.

(b) Kamau lent Onyango Shs. 5,000 which was due for payment on 1st December,
1993. On 1st October Kamau asked Onyango for immediate repayment because he
wanted to pay a deposit for a piece of land he was buying in Kariobangi. Onyango
told Kamau that he had no money whereupon Kamau told him that if he paid Shs.
4000 immediately he would accept it in full settlement of the debt. Onyango relied
on Kamau's promise and paid Kamau Shs. 4,000 on 2nd October.

Onyango has informed you that Kamau is demanding the balance of Shs.1,000 and has
threatened to take him to court if he does not pay the money within a week.

Advise him.

5. (a) What is meant by liquidated damages and penalties?

(b) State the rules by which the courts distinguish liquidated damages from penalties.
Why is this distinction important?

(c) C company contracted with W company to deliver and erect certain machinery in
twenty weeks for W company at a cost of Shs.2,000,000. C co129129mpany
agreed in one of the clauses of the contract that if they exceeded the stipulated
period of twenty weeks they were "to pay by way of penalty the sum of Shs.15,000
per extra week". C company were ten weeks late in completing their contractual
undertaking. In view of the penalty clause in the contract, W company claimed
Shs.200,000 from C company, the actual loss they had suffered as a result of ten
weeks' delay. C company insisted that they were liable to pay Shs.15.000 per week
as agreed in the contract.
 Consider the legal position.

6. (a) What conditions must be satisfied for agency by ratification to arise?

(b) A made an offer to B, the managing director of a company, for the supply of
certain building materials. B accepted the offer, without authority, on behalf of the
company. Then A withdrew his offer and gave the company a notice to that effect.
The company's directors subsequently met and passed a resolution by which they
approved what B had done on behalf of the company.

Explain the legal position.

SALE OF GOODS AND HIRE PURCHASE

CONTENTS
1. Read the Study Text provided below
2. Attempt the reinforcing questions given at the end of the lesson
3. Compare your answers with those given in lesson 9
4. Read Chapters 8 and 9 of Hussain

SALE OF GOODS
The Kenya Law relating to the sale and purchase of goods is contained in the Sale of Goods Act (cap 31). The Act
is a reproduction of the English Sale of Goods Act 1893 which was made part of the Kenya Law by the colonial
administration in Kenya on 1st October 1931.

5.1.2 DEFINITION

Section 3 (1) of the Act defines a sale of goods as "a contract whereby the seller transfers or agrees to
transfer the property in goods to the buyer for a money consideration called the price".

5.1.3 ELEMENTS OF THE DEFINITION

The legal consequences of the above definition are as follows:

(a) A sale of goods is "a contract". Though Part II of the Act bears the heading "formation of the
contract" there is nothing in it which regulates the actual formation of the contract of sale of goods. It
therefore appears reasonable to assume that the contract envisaged by the Act is to be formed
according to the rules which govern the formation of contracts in general, namely, the rules of the
common law. Consequently, before a sale of goods can take place:

(i) There must be an offer to buy, or sell, followed by a corresponding acceptance.

(ii) All the other conditions prescribed by the common law for the validity of a contract must be
met. However, s.6 provides that a contract for the sale of goods worth two hundred shillings
or more must be entered into, or evidenced, in writing, otherwise the contract is
unenforceable.

(b) The contract effects a transfer of " the property in the goods" delineated by it to the buyer.

(i) Where the transfer is immediate, the contract constitutes "a sale".

(ii) Where the transfer is delayed, the contract constitutes "an agreement to sell."

"The property in goods" in this context means "the ownership of the goods" sold or agreed to
be sold. In effect what the buyer pays for is not the physical goods but the right to own them.
As soon as he has acquired the ownership he will be in a position to do anything he pleases—
usually taking possession of them or reselling them.

(c) The consideration for the transfer of ownership must be "a money consideration" . This means that a
barter is not a "sale" of goods. It is an exchange of goods since no "money" (cash or cheque) is paid
by either party.
 In Aldridge v Johnson an agreement provided for the exchange of 52 bullocks with 100 quarters of
barley, the difference in their value being payable in cash. It was held that the agreement constituted
a sale of goods within the statutory definition. The money paid by the one party would be regarded as
the "money consideration" for the goods delivered or to be delivered by the other party. The apparent
inadequacy of the consideration is, of course, legally irrelevant. In any case the owner of the goods
must be assumed to know what he is doing.

(d) The provision that the property in the goods is "transferred" means that there must be two different
parties to the contract. Consequently, a person cannot sell goods to himself—although it appears
probable that he can do so in two distinct capacities. However, there may be a sale by a "part-owner"
of the goods.

5.1.4 GOODS

Although "goods" in common parlance has an obvious meaning the Act has given the word a technical
meaning. It provides that "goods" include "all chattels personnel other than things in action and money".
This covers anything that can be touched, moved or taken away but does not cover land and other species of
commercial property such as shares, debts, etc which cannot be physically moved or taken away.

"Money" may in exceptional cases be "goods". An example is where money is bought or sold as a
curio by a person who collects coins. However, money which is used as currency, or legal tender, cannot be
sold as "goods". So, if a person goes to a bank and "buys" some sterling pounds to take to his son who is
studying in the United Kingdom, the pounds will have been transferred as part of a currency transaction or
"foreign exchange". It legally does not constitute a sale.

5.1.5 TYPE OF GOODS

The Act classifies goods into:

(i) Specific Goods

Specific goods are "goods" which are identified and agreed upon at the time the contract of sale is
made (s.2). This definition embraces nearly all the goods which people buy in shops, market places
and super-markets.

(ii) Unascertained Goods

The phrase "unascertained goods" is used in contradistinction to specific goods. It includes goods to
be manufactured or acquired by the seller after the making of the contract of sale.

The distinction between specific and unascertained goods is important because it governs the
moment of transfer of property.

(iii) Existing and future goods

Existing goods are goods owned and possessed by the seller when the contract of sale is made. Future goods are
goods to be acquired or manufactured by the seller after the contract is made.

5.1.6 CONTRACT FOR "WORK AND MATERIALS"

In Robinson v Graves a dispute arose over an agreement under which an artist had promised to make a
portrait for 250 guineas. The question which had to be considered was whether the agreement constituted a
sale of goods so that the provisions of the Act applied to it. It was held by the English Court of Appeal that
the agreement was not sale of goods but a contract for "work and materials". Although a good was to be
 ultimately delivered, the substance of the contract was not a transfer of its ownership (since it did not exist
at the time of the contract) but the application of the artist's skill towards its production. What was to be paid
for was the work to be done by him, and having been paid for the work, he must deliver the physical object
or material he produced or made. Such a contract, not being a sale of goods, is not governed by the Act.

5.1.7 CAPACITY

S.4 (1) provides that capacity to buy and sell is governed by the general law concerning capacity to contract.
However, where necessaries are sold and delivered to an infant or a person who, by reason of mental
incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for them.
"Necessaries" are defined as goods which are suitable to the condition in life of the infant or other
incompetent person, and to his actual requirements at the time of sale and delivery.

5.1.8 FORM

S.6 provides that a contract for the sale of goods to the value of two hundred shillings or more cannot be
enforced unless the buyer accepts and receives the goods, or gives an earnest or made past payment, or
unless the party to be charged (whether buyer or seller) signed a written memorandum thereof. Contracts for
the sale of goods whose value is less than two hundred shillings may be made in writing, by word of mouth,
or implied from conduct.

5.1.9 SUBJECT-MATTER OF THE CONTRACT

By S.7(1) the goods which form the subject-matter of a contract of sale may be either existing goods,
owned or possessed by the seller, or future goods, to be manufactured or acquired by the seller after the
making of the contract of sale.

(a) By S.8, if, in a contract for the sale of specific goods, the goods have, without the knowledge of the
seller, perished at the time when the contract was made, the contract is void. This provision codifies
the common law doctrine of "res extincta" whose application is illustrated by Conturie v Hastie (See
4.1). The same rule applies where there is a sale of indivisible quantity of specific goods and part
only of the goods have perished at the time when the contract is made. This was explained in
Barrow, Lane and Ballard Limited v Phillip, Phillips and Company Limited in which the
plaintiffs contracted to sell to the defendants 700 bags of nuts which were believed to be lying in
certain warehouses. Unknown to them, 109 bags had disappeared (presumably by theft) at the time
the contract was made, and a further 450 bags disappeared before the goods could be delivered to the
defendants. The plaintiffs sued for the price of the goods. It was held that the contract was void and
the defendants were not liable.

Where the contract of sale is divisible or severable it appears reasonable to assume that S.8 would
avoid the contract as to the goods which had actually perished. Although the word "perished" literally
would cover only cases of physical destruction of the goods, the case of Asfar and Company
Limited v Blundell shows that it may, in appropriate cases, be construed to cover a change in the
physical condition of the goods which renders them unfit for the purpose for which they would be
normally bought. In such a case, the goods would be regarded as having "perished" in a commercial
sense.

In that case the court held that dates which had been submerged for two days and when brought to
the surface were, in the words of the judge, "simply a mass of pulpy matter impregnated with sewage
and in a state of fermentation" had "perished".

(b) By S.9, where the contract is for the sale of unascertained or future goods and subsequently the
goods, without any fault of the seller or buyer, perish before the risk passes to the buyer, the
agreement is thereby avoided. This provision appears to be a codification of the common law rule
relating to discharge of contract by frustration. (explained in paragraph 10 of lesson 3)
5.1.10 THE PRICE

Section 10 provides that the price for goods may be fixed by:

(i) Contract;
(ii) The manner provided in the contract; or
(iii) The course of dealing of the parties.

If the price is not fixed or determined as aforesaid, the buyer must pay a reasonable price.

Where the contract specifies that the price is to be fixed by the valuation of a third party and he does
not make the valuation the contract is unvoiced. If however the goods (or part of them) have been delivered
to and appropriated by the buyer he must pay a reasonable price for them. If the failure to value is as a result
of the fault of the buyer or seller, he must pay damages.

5.1.11 TERMS OF CONTRACT

The terms of a contract of a sale of goods are the same as the terms of other contracts, which were explained
in Lesson 3, paragraph 8. They are governed by the common law which relies on the intention of the parties
as the basis of their classification. They are express terms.

5.1.12 IMPLIED TERMS

There are certain terms, called conditions and warranties, which are implied into every contract covered by
the Sale of Goods Act, unless the contract shows a different intention. They were implied for the first time
by the English Sale of Goods Act 1893 in order to protect the buyer against certain unfair consequences of
the common law rule 'caveat emptor' ("buyer beware"). For example, if A sold to B goods which he (A)
had stolen from C, and C eventually recovered the goods from B, A would not be liable to B (either in
damages or for the price) unless, before the sale, B had asked A whether the goods were his goods and he
(A) had actually assured him that they were. If B merely assumed that A owned the goods he would have to
suffer the consequences of his assumption. After all, he must have been aware that sometimes people sell
stolen goods and A was not under any legal obligation to confide in him that he had in fact stolen the
particular goods. The common law seems to have been oblivious of the fact that, in practice, buyers do not
ask such questions—since it would be mutually embarrassing to ask such a question.

The implied terms are as follows.

1. Conditions

There are seven conditions which are implied by the Act. They are:

(a) Right to sell.

S.14 (a) provides that there is an implied condition that the seller has a right to sell the goods
and, in the case of an agreement to sell, that he will have a right to sell at the time that the
property is to pass.

It appears that the primary aim of this provision is to protect a buyer who unknowingly
bought, or agreed to buy, goods which had been stolen. This is illustrated by Rowland v
Divall (1923) in which the plaintiff bought a car from the defendants. Four months after the
sale, it was discovered that the car had been stolen by the person from whom the defendant
had bought it. The plaintiff, having surrendered the car to the owner, sued the defendant to
recover the money he had paid to him as the price of the car. The defendant contended that:

(a) Since the plaintiff had the use of the car for over four months, he had legally accepted
it within S36 and his proper remedy must be a claim for damages for breach of
warranty.
 (b) The damages must be reduced by the amount that the court would regard as payable by
the plaintiff in respect of the benefit he had received while using the car for the four
months. The court rejected both arguments. Atkin, L. J. stated:

"The buyer has not received any part of that which he contracted to receive namely, the
property and right to possession and, that being so, there has been total failure of
consideration".

The buyer was therefore entitled to recover the full purchase price from the seller.

Exceptionally, a seller who is selling goods which had not been stolen may be liable for
breach of the condition. This is illustrated by Niblet Limited v Confectioners' Materials
Company Limited (1921) in which the defendants sold the plaintiffs 3,000 cans of
condensed milk which were being shipped to the United Kingdom from the United States Of
America. The cans were labelled "Nissly", which was an infringement of the trademark of
Nestle, an English company. Customs authorities in England refused to release the cans to the
plaintiff until after the labels had been removed and destroyed. The plaintiff sold the
unlabelled tins for the best price he could obtain and then sued for damages for breach of the
implied condition. It was held that the defendants were in breach. Although they owned the
goods and so had power to sell them they did not have the right to do so since Nestle could
have obtained an injunction restraining them from selling the goods in England.

(b) Correspond with description

S.15 provides that, where goods are sold by description, there is an implied condition that the
goods correspond with the description. A sale is by description when:

(a) The goods are unascertained or future goods

(b) The goods are specific but are bought as "a thing corresponding with specific
description".

An example of (a) is provided by Varley v Whipp in which the defendant agreed to buy from
the plaintiff a second-hand reaping machine which was stated to have been new the previous
year and hardly used at all. The defendant had not seen the machine at the time of the sale. He
later refused to accept it, on the ground that it did not correspond with the description. The
court agreed that the machine did not correspond with its description and held that the
defendant was not liable for the price. The judge stated, inter alia, that the phrase "sale by
description" must apply to "all cases where the purchaser has not seen the goods but is
relying on the description alone".

An example of (b) is provided by Grant v Australian Knitting Mills Limited (1936) in

which the plaintiff went to the defendant's shop and asked for a pair of long woollen
underwear. The goods were displayed on the counter before him and a sales assistant selected
a pair which he bought. The underwear contained an excess of sulphite and the plaintiff
contracted dermatitis after wearing it. The chemical should have been removed before the
underwear was sold but this had not been done. It was held that there had been a sale by
description.

The judge stated: "There is a sale by description even though the buyer is buying something
displayed before him on the counter: a thing is sold by description, though it is specific, so
 long as it is sold not merely as the specific thing, but as a thing corresponding to a description,
e.g. woollen undergarments, a hot-water bottle, a second-hand reaping machine ..."

(c) Correspond to sample and description

S.15 (2) provides that, where there is a sale of goods by sample as well as by description, the goods
must correspond with the description as well as the sample. This provision is illustrated by the
following cases:

In Nichol v Godts (1854)

The plaintiff agreed to sell to the defendants some oil which was described as "foreign refined
rape oil, warranted only to equal sample". He delivered oil equal to the quality sample but
which was not "foreign refined rape oil". It was held that the defendant was entitled to reject
the goods.

In Re: Moore and Company, and Landauer and Company (1921)

The buyer ordered 3,100 cases of Australian canned fruit to be packed in crates containing 30
cans per crate. When the goods arrived it was found that about half the crates contained 24
cans and the remainder 30 cans. The buyer rejected the goods although it was agreed that
there was no difference in market value between goods packed 24 cans and goods packed 30
cans. The English Court of Appeal held that the way in which the goods were to be packed
was part of the description and the buyer had rightly rejected them, even though he was not in
any way affected by the wrong packing. The correctness of this decision has been doubted in
later English cases which seem to suggest that words of description are only those words
necessary to identify the goods sold. This is illustrated by Ashington Piggeries Limited v
Christopher Hill Limited (1972) in which the buyers, who were breeders of mink, ordered a
foodstuff called "King Size" from the sellers, who were manufacturers of animal food-stuff.
The recipe, which was supplied by the buyers included herring meal. The sellers were told
that the "King Size" was required for feeding minks.

The herring meal used to make the King Size had been stored in a chemical which, unknown
to the sellers, had reacted with the herring to create a poisonous substance which killed the
mink. The buyers sued the sellers claiming, inter alia, breach of S.15.

The House of Lords held that there had been no breach of the section, because the purpose for
which the goods were required did not form part of their identification. The words "for mink"
would have formed part of the description by helping to identify them for "King Size" for the
other type of animals.

(iii) "Merchantable quality".

Section 16 (b) provides that, where goods are bought by description from a seller who deals
in goods of that description, there is an implied condition that they are of "merchantable
quality. Although "merchantable quality" is not defined by the Act it is generally stated in
legal textbooks that goods are of "merchantable quality" if they are reasonably fit for the
purpose or purposes for which the goods of that kind are generally bought. The following
examples from decided cases show when goods would be regarded as not being
merchantable:

• In Wren v Holt it was held that beer which contained an abnormal quantity of arsenic
acid was not of merchantable quality. The fact that plaintiff became sick after drinking the
beer proved that it was not fit for its general use as beer.

• In Godley v Perry a catapult which broke while being used by a child for whom it had
been bought and raptured his eye was held not to be of merchantable quality.
 • In Frost v Aylesbury Dairy Company it was held that milk which was contaminated
with germs of typhoid fever, from which the plaintiff died after drinking the milk, was not
of merchantable quality.

The case of Mash and Murrel v Emmanuel lays down the rule that goods must be of
merchantable quality at the time of delivery. In that case the sellers who were in Cyprus,
sold potatoes "C and F Liverpool". The potatoes, though fresh when loaded, were rotten by
the time the ship arrived. It was held that the sellers were liable for breach of the implied
condition.

(e) fitness for purpose

That goods which are bought for a particular purpose are reasonably fit for that purpose:(S.16
(a))

This condition is implied only if:

• The particular purpose was made known to the seller, expressly or by implication. This is
illustrated by:

Baldry v Marshall (36) in which the purpose was expressly made known to the seller.

Priest v Last (37) in which the purpose was deemed to have been impliedly made known
to the seller.

• The goods are of a description which it is in the course of the seller's business to supply.

This provision limits liability to manufacturers, wholesalers, retailers and dealers. Private
sales of second-hand goods are presumably excluded from its operation.

• The buyer relied on the seller's skill or judgement. The reliance will generally be assumed,
and is based on the fact that selling the goods is the seller's profession or business.

Although Section 16 (a) contains the words "whether he be the manufacturer or not" the case
of Frost v Aylesbury Dairy Company (38) shows that the liability which it imposes is not
restricted to manufactured goods and may, in appropriate cases, apply to non-manufactured
goods as well. That is presumably why the words are put in brackets.

Exception

The seller would not be liable if he proves that the goods were sold under a patent or other
trade name, as was explained in Bristol Tramway Company Limited v Fiat Motors (39),
and that the buyer did not rely on his skill and judgement, as explained in Baldry v Marshall
(36).

(f) Bulk oods shall correspond with the sample.

S.17 (a) that where the goods are bought by sample, there is an implied condition that the bulk
will correspond with the sample in quality. If a sale is by sample and description the goods
supplied must correspond with both the sample and the description, as was held in Nichol v
Godts (supra).

(g) opportunity to compare bulk and sample

 That the buyer will have a reasonable opportunity of comparing the bulk with the
sample: s.17 (a). This condition suspends the operation of s.28 which provides that the time
of delivery and the time of payment are concurrent conditions. The seller cannot therefore
demand the price when he delivers the goods. He must wait for a reasonable time during
which the buyer will examine the goods to check if the bulk correspond with the sample.

(h) goods free from defect rendering them unmerchantable

That the goods will be, free from any defect rendering them unmerchantable which
would not be apparent on a reasonable examination of sample.

Liability for breach of this condition is illustrated by Godley v Perry in which the plaintiff, a
boy of six, bought a plastic catapult from the defendant, a stationer. He used the catapult
properly but it broke in his hands and part of it raptured his eye. The evidence showed that the
catapult had a defect which was not discoverable on a reasonable examination of it.

The defendant had himself bought a quantity of the catapults from a wholesaler by sample
and his wife had tested the sample, before placing the order, by pulling back its elastic.
It was held that the defendants were liable because:

(a) the catapult was not reasonably fit for the purpose for which it had been bought; and

(b) the catapult was not of merchantable quality and the defect of the goods could not be
discovered by a reasonable examination of the sample.

The judge explained that a buyer is not expected to carry out every test that might be
practicable. The statutory yardstick is "not extreme ingenuity but reasonableness".

(i) A condition may be annexed by trade customer usage

Effect of Breach

S.13 (1) provides that the breach of a condition entitles the buyer to treat the contract as at an end
and to sue for damages, or to affirm the contract and sue for damages.

TREATMENT OF CONDITIONS AS WARRANTIES

By section 13(1) a buyer may waive a breach of condition by the seller, or elect to treat it as a breach
of warranty. However, Section 13(3) provides that a buyer must treat a breach of condition as a
breach of warranty where the contract is not severable and he has accepted the goods or some of
them.

Exclusion of Liability

Section 55 enables the seller to exclude or limit liability for a breach of any of the implied conditions.
It however provides that an express condition does not negate a condition implied by the Act unless
they are mutually inconsistent.

But an express warranty cannot negate the effect of an implied condition. This is illustrated by
Baldry v Marshall in which a clause which exempted the sellers from liability for breach of any
"guarantee or warranty, statutory or otherwise", was held not to exonerate them from liability for
breach of implied condition that the goods were reasonably fit for the particular purpose for which
they had been bought.

2. Warranties

The following are the warranties implied by the Act:

 (a) quiet possession (s.14 (b)). This provision is intended to protect the buyer against defects of
title which arise after the contract is entered into. Although such situations are extremely rare,
they may arise occasionally, as illustrated by Microbeads v Vinhurst Road Markers
Limited in which the facts, briefly, were as follows.

In January 1970 the sellers sold a number of road marking machines to the buyer. Unknown
to both parties, another company was in the process of patenting their own road marking
apparatus under the Patents Act which gave them rights to enforce the patent from November
1970. In 1972 the patentee sued the buyer for using the road marking machines in breach of
patent. The buyers then claimed against the sellers for breach of implied condition as title and
breach of the implied warranty as to quiet possession. It was held that:

(a) there was no breach of the implied condition since at the time of the sale the sellers
could not have been prevented by injunction from selling the goods, but

(b) there was a breach of the implied warranty as to quiet possession. Lord Denning
explained that the warranty is a continuing warranty which applies not just at the time
of the sale but also in the future.
(b) Free from charge or enaumbrance

That the goods shall be free from any charge or encumbrance in favour of any third
party which is not declared or made known to the buyer before or at the time when the
contract is made: s.4 (c). This provision is intended to protect the buyer against the defects in
the seller's title which exist at the time the contract is made.

(c) A warranty may be annexed by trade customers.

5.1.13 "NEMO DAT QUOD NON HABET"

Another common law maxim that applies to sale of goods is "nemo dat quod non habet": a person cannot
give that which he does not have. This maxim has been incorporated into every contract of sale of goods by
s.23, which provides that "where goods are sold by a person who is not the owner thereof and who does not
sell them with the consent or authority of the owner, the buyer acquires no better title to the goods than the
seller had".

This principle was developed by the common law courts to protect the interest of the true owner of the
goods. It was the case in Cundy v Lindsay & Co.

The classical illustration of the conflict between the interests of the owner and the bonafide purchaser was
enutiated by Lord Denning in Bishopsgate Motor Finance Corporation v Transport Brakes Ltd

Consequently, if the goods had been obtained by fraud and the seller had a voidable title thereto, the buyer
would acquire a voidable title even if he were not aware of the fraud. If the seller had a valid title, the buyer
would get a valid title.

Exceptions

The "nemo dat" rule is subject to the following exceptions which are provided by the Act:

(a) Estoppel

S.23 (1) provides that the "nemo dat" rule will not apply if "the owner of the goods is by his conduct
preluded from denying the seller's authority to sell". This is illustrated by Pickard v Sears (44). An
estoppel will be raised against the owner of the goods only if his conduct misled a third party into
believing that the person who was selling the disputed goods was either their owner, or had the
owner's authority to sell them.
 (b) Sale by a Factor

Sale by a factor gives a good title to the buyer in good faith. The factor is a mercantile agent whose
business is to sell or otherwise deal in goods. Under the Factors Act 1889, he can sell goods entrusted
to him and give a good title provided the conditions of the Act are complied with. These conditions
are that the goods shall have been entrusted to him in the ordinary course of his business and that
they shall be in his possession with consent of the owner.

(c) Sale under a Voidable Title

Where the seller of goods has a voidable title thereto but his title has not been avoided at the time of
the sale, a buyer in good faith without notice of the defect in the seller's title acquires a good title.
(Section 24). An example of Lewis v Avery.
(d) Resale by a Seller in Possession

If a person who has sold goods, but has remained in possession of them or of the documents of title
to them, transfers the goods or documents of title to a third person, that person acquires a good title if
he receives the goods in good faith and without notice of the previous sale (Section 26 (1)).

(e) Sale by a buyer in Possession

Where a person having bought or agreed to buy goods obtains with the seller's consent possession of
the goods or the documents of title to them, a transfer by that person of the goods or documents of
title to a third person receiving them in good faith and without notice of lien or other right of the
original seller in regard to the goods, has the same effect as if the person making the transfer were a
mercantile agent in possession of the goods or documents of title with the consent of the owner. The
seller has rights against the original purchaser but cannot claim the goods from the second purchaser
(Section 26 (2)). Cahn v Pockett's Bristol Channel Steamer Packet Co. Ltd.: C forwarded to X, a
foreign purchaser, a bill of exchange drawn on X for acceptance. Without accepting the bill of
exchange X transferred the bill of landing to P for value. It was held that P had acquired a good title
as X had obtained possession of the bill of lading with C's consent.

(f) Sale Under Statutory powers of sale, such as a sale under the Uncollected Goods Act.

(g) Sale under a common law power of sale, such as a sale by an agent of necessity.

(h) Sale under a court order.

(i) Sale in market.

Stolen Goods

Where goods have been stolen and the thief has been prosecuted and convicted, the property in the goods
revests in the original owner. This is so even if the goods had been resold or otherwise dealt with in the
meantime.

This provision may be viewed as supplementing the provisions of the Penal Code pertaining to theft by
making it impossible for a client of a thief to plead his innocence as a ground for retaining stolen goods. This
rule should make people extremely careful when buying goods so that they do not buy them from a thief. If
that really happened thieves would have no buyers and would be forced to abandon stealing. Unfortunately
this is not so and some people knowingly buy stolen goods because they are generally cheaper to buy.

5.1.14 TRANSFER OR PASSING OF PROPERTY

Assuming that the seller has a right to sell the goods, it becomes necessary to determine the precise moment
when the transfer of the property in goods, envisaged by the contract of sale, takes place. Such determination
is important because:

(a) It determines when risk in the goods pass to the buyer; if the goods were destroyed accidentally it
 would be necessary to know which party has to bear the loss.

(b) It determines the remedies available to the parties.

(c) It is the essence of the contract of sale of that property.

General Rule

The general rule is that the property passes in accordance with the intention of the parties, express or
implied. In practice, however, buyers and sellers, not being lawyers, never advert to this question. They do
not distinguish, as the lawyer does, between ownership and possession of goods. In realisation of this fact,
the Act provides the rules which will govern the passing of property from the seller to the buyer. These rules
are contained in S.20 of the Act and are as follows.

(a). Where there is an unconditional contract for sale of specific goods in a deliverable state, the property
passes to the buyer at the time when the contract is made.

It is immaterial in such a case that the time of payment or of delivery, or both, is postponed.

Goods are said to be in a deliverable state if they are in such a state that the buyer would, under the
contract, be bound to take delivery of them. This is a very vague statement whose purport may be
illustrated by the following cases:

In Underwood Limited v Burgh, Castle, Brick and Cement Syndicate (1922)

In this case there was a contract for the sale of a condensing engine weighing 30 tons. At the
time of the sale, it was still fixed to the floor of the building in which it was installed.
However, it was agreed between the seller and the buyer that the engine would be detached,
dismantled and delivered by the seller "free on rail". The seller detached the engine and
dismantled it but while it was being taken to the railway station it was damaged. The buyer
refused to accept it and the seller sued for the price. It was held that the property had not
passed to the buyer, because the engine was not in a deliverable state at the time the contract
was made.

In Philip Head and Sons v Showfronts (1970)

The defendants bought a carpet from the plaintiffs. When the carpet was delivered to their
showroom where it was to be laid, it was found that it could not fit properly and had to be sent
away for stitching. It was returned the next day wrapped in heavy bales. It was stolen before it
could be laid and the defendants refused to pay for it. It was held that they were not liable.
The property in the carpet had not passed to them since, at the time it was stolen, it was not in
a deliverable state.

(b). Where there is a contract for the sale of specific goods not in a deliverable state, and the seller has to
do something to the goods to put them in deliverable state, the property does not pass until that thing
is done and the buyer has notice of it. The application of this rule is also illustrated by the
Underwood Limited v Burgh Castle case, above. The property in the engine could not have passed
until the engine had been safely put on rail and the buyer notified.

(c) Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to
weigh, measure, test or do something with reference to the goods for the purpose of
ascertaining the price, the property does not pass until that thing is done and the buyer has
notice of it.

In Acraman v Morrice the defendant had agreed to buy the trunks of certain trees. Although the
contract did not expressly say so, the custom of the particular trade was that the buyer measures and
marks the portions of the trees that he wanted and the seller would then cut off the rejected parts. The
seller did not do so but nevertheless sued for the price. It was held that the defendant was not liable
because no property in the trees had passed to him. The property would have passed after the seller
had actually severed the rejected parts and the buyer had been notified of it.
(d). When the goods are delivered to the buyer on approval or "on sale or return" or other similar terms,
the property therein passes to the buyer:

(a) when he signifies his approval or acceptance to the seller; or

(b) if he does not signify his approval or acceptance, he retains the goods, without giving notice
of rejection—

(i) beyond the time fixed for the return of the goods, or
(ii) if no time is fixed, beyond the expiration of a reasonable time; or

(c) he does any act adopting the transaction.

The effect of this provision is to change the relevant common law rules relating to offer and
acceptance. At common law, there would have been no contract between the parties. However, the
provision creates a contract by converting what would have been lapse of an offer into an acceptance
thereof.

The meaning of "any act adopting the transaction" was explained in Kirkham v Attenborough
(1897) in which the plaintiff delivered jewellery to a third party "on sale or return". The third party
pledged the jewellery with the defendant without informing the plaintiff that he had accepted his
offer. The plaintiff sued for the recovery of the jewellery on the ground that it was still his property.

It was held that the pledge was an act by the third party (offeree) "adopting the transaction" and,
therefore, the property in the jewellery had passed to him, so that the sale to the defendant was
effective.

This case should be compared to Kempler v Bavington in which the plaintiff, a diamond merchant,
delivered a quantity of diamonds to a third party "on sale or return". The delivery note which
accompanied the diamonds informed the third party that the plaintiff would debit his account with the
price of any diamonds if they were not returned within seven days, and that, until the account was
charged, the diamonds belonged to the plaintiff. As soon as he received the goods, the third party
sold them to the defendant and disappeared with the money. As the third party's account had not been
charged with the price of the diamonds at the time he sold them, it was held that the property in them
still rested with the plaintiff. For this reason the plaintiff was able to recover the diamonds from the
defendant.

e. Where there is a contract for the sale of unascertained or future goods by description, and goods of
that description and in a deliverable state are unconditionally appropriated to the contract, either by
the seller with the assent of the buyer, or by the buyer with assent of the seller, the property in the
goods thereupon passes to the buyer.

In Hayman v M'Lintock, A sold to B 50 sacks of flour out of 200 lying in his warehouse, for which
B obtained a storage warrant. Nothing was done to appropriate any particular sacks to the sale. It was
held that no property in any sacks passed to B.

Where the seller delivers the goods to a carrier or to any other person for the purpose of transmission
to the buyer, he is deemed to have unconditionally appropriated the goods to the contract provided
that when he makes such delivery he does not reserve the right of disposal.

In Pignatorio v Gilroy it was explained that where the seller gives notice of appropriation and the
buyer makes no objection within a reasonable time, his assent is presumed and the property passes on
the expiration of that time.

(f) Seller's reservation regarding disposal

Where the seller reserves the right of disposal of the goods until certain conditions are fulfilled, the
 property in the goods does not pass until such conditions are fulfilled.

(g) Sale by Auction

On a sale by auction the property in the goods knocked down passes to the buyer at the fall of the
hammer, in the absence of any agreement to the contrary.

5.1.15 PERFORMANCE OF CONTRACT

Obligations of the parties

Duties of the seller

a) Duty to deliver the goods

b) Duty to pass a good title
c) Duty to put the goods into a deliverable state

"It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in
accordance with the terms of the contract of sale." (Section 28.)

"Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions,
that is to say, the seller must be ready and willing to give possession of the goods to the buyer in
exchange for the price, and the buyer must be ready and willing to pay the price in exchange for the
possession of the goods." (Section 29)

Where goods have been delivered to the buyer, and he has had a reasonable opportunity of inspecting
them, he is deemed to have accepted them.

In Molling v Dean certain goods were sold in Germany to buyers who lived in England. The goods
were sent direct to America. When they reached America, they were examined and it was discovered
that they were not in conformity with the contract.

The Court held that the goods could properly be rejected since America was the assumed place for
inspection. The buyers right to reject the goods was not lost by reason of the fact that the goods had not
been examined at the port of shipment.

d). Duty to Deliver Right quantity

Delivery must be of the exact quantity—if it is too much or too little the buyer may reject the whole.

In Hart v Mills buyers ordered two-dozen bottles of wine. In response, the sellers sent four dozen. It
was held that all the four-dozen could be returned. Although the buyer’s behaviour appeared to be
unreasonable, it was consistent with the provision of the Act. However, where the delivery is greater,
or less, than the amount contracted for, and the buyer accepts part of whole of the delivery, he is
liable for the price at the contract rate. He cannot then claim damages afterwards. This is illustrated
by:

In Gabriel, Wade and English Limited v Arcos Limited: in which there was a contract for the sale
of a thousand standards, about 85% red wood and about 15% white wood. A delivery was made and
accepted by the buyers in which white wood largely exceeded 15%. It was held that the buyers could
not sue for damages. They could have rejected the consignment, had they so wished, but having
accepted it, they could not sue for damages.

If quantities are stated as "more or less" the seller is allowed a reasonable margin. If, however, that
margin is exceeded, the buyer may reject the goods. Each case has to be judged on its own merits.
For example:
 (i) In Payne and Routh v Lillico and Sons a contract was made for the sale of 4,000 tons of
meal within "2% or less". The sellers considerably exceeded the allowance and the buyers
refused to take delivery. It was held that the buyers were entitled to refuse and the court would
not make further variation in the quantity; and that where a margin is expressly limited for
variation, it should be adhered to unless the difference delivered is trifling, in which case it
may be disregarded.

(ii) In McConnel v Murphy: The contract was for "all the spares manufactured by X, say about
600, averaging 16 inches". 496 of the specified kind and measurement were tendered. The
tender was held good.

(iii) In Morris v Levison: The contract was for "a full and complete cargo, say 1,100 tons". The
vessel would take 1,210 tons, and only 1,080 were ordered. It was decided that, under these
circumstances, this would not suffice.

(iv) In Miller v Borner: An undertaking was to load a "cargo of ore, say about 2,080 tons,
although the capacity of the ship was greater. The charterer satisfied the contract by loading
2,840 tons, although the capacity of the ship was greater. The absence of the words "full and
complete" led to a result opposite to that of Morris v Levison.

(v) In Re Harrison and Micks Lambert: On the sale of the "remainder of a cargo (more or less)
5,400 quarters wheat", the buyers were held bound to accept 5,574 quarters, on the ground
that there was a sale of the whole remainder, whatever the quantity might be; the seller's
collateral estimate not affecting the meaning of the word "remainder".

Delivery by Instalments

Section 32 (1) of the Act states that unless otherwise agreed the buyer of goods is not bound to accept
delivery thereof by instalments. If the contract states definitely that the goods are to be delivered by
instalments, each instalment to be paid for separately, "it is a question in each case depending on the
terms of the contract and the circumstances of the case" whether a breach is a breach of the contract
as a whole, or whether such breach can be dealt with apart from the main contract.

Each instalment must fulfil the conditions of sale as to quality, description, etc., and the fact that the
buyer has accepted previous instalments does not preclude him from rejecting a subsequent
instalment which is not of the contract quality (Jackson v Rotax Motor Company (1910)).

In Maple Flock Company Limited v Universal Furniture Products (Wembley) Limited (1934)
it was held that the tests to be applied to determine whether the breach is such as to give the buyer the
right to regard the contract as at an end are:

(a) The quantitative ratio which the breach bears to the whole contract; and
(b) The degree of probability or improbability that the breach will be repeated.

In Brandt v Lawrence it was held that repudiation by the buyer cannot take place until after proper
performance of the contract has become impossible. This means that if tender of part of the goods
only is made, tender of that part cannot be refused because at that time the buyer does not know for
certain that the balance will not be delivered.

DELIVERY

This is the voluntary transfer of possession from one person to another. Delivery generally takes any of the
following forms, namely

(a) Physical transfer of the goods

(b) Delivery to common carrier
(c) Delivery of documents of title
(d) Transfer of the means of obtaining the delivery
(e) Delivery by attornement

RULES OF DELIVERY

(a) The goods must be in a deliverable state

(b) Unless otherwise agreed, the cost of putting the goods into a deliverable state is borne by the seller

(c) Whether it is for the seller to transmit the goods to the buyer or for the buyer to take delivery thereof depends
on the terms of the contract

(d) Unless otherwise agreed the place of delivery is the sellers place of business, if any if not, his residence.

(e) In a sale f specific goods which the parties know are in some other place, that other place is the place of
delivery.

(f) If the goods are in the hands of a third party, delivery takes place when such party notifies the buyer that he
holds goods on his behalf.

(g) If the seller is bound to transmit the goods

(h) Delivery by common carrier is prima facie complete when the goods are handed on to the carrier.

(i) If the seller delivers more goods than contracted the buyer is entitled to

(i) Reject all the goods

(ii) Accept those included in the contract and reject the balance or

(iii) Accept all the goods and pay at the contract rate.

(j) If the seller delivers less goods than contracted, the seller is entitled to:

(i) reject all the goods or

(ii) accept and pay at the contract rate.

(k) If the goods delivered are mixed with goods of a different description, the buyer is entitled to
(i) reject the goods or
(ii) accept those included in the contract and reject the balance.

(l) Unless otherwise agreed the buyer is not bond to accept delivery by instalments

(m) Where delivery is by instalments to be paid for separately and the seller makes one or more defective deliveries
or the buyer neglects or refuses to accept and pay one or more deliveries, whether this is treated as a severable
breach or a total repudiation of the contract depends on
(i) the terms of contract
(ii) the circumstances of the case.

(n) if the buyer refuses to take delivery as of right he would not be bound to return the goods but must notify the
seller his refusal.
DUTIES OF THE BUYER

a) Take delivery; Under section 2 of the Act, it is the duty of the buyer to take delivery of the goods failing which
the seller may maintain an action against him for damages for non-acceptance pursuant to section 50(1) of the
Act.

b) Pay the price Under section 28 of the Act it is the duty of the buyer to pay the price of the goods failing which
the seller may maintain an action against him for the price pursuant to section 49 of the Act.

5.1.16 BREACH OF CONTRACT

Remedies of the parties

A buyer commits a breach of the contract of sale if he wrongfully fails to pay for the goods in accordance
with the terms of the contract. In such a case, the seller is legally known as "the unpaid seller".

Section 39 defines an unpaid seller as follows:

(a) The seller of goods is deemed to be an unpaid seller within the meaning of this Act:

(i) When the whole of the price has not been paid or tendered.

(ii) When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has not been fulfilled by reason of the
dishonour of the instrument or otherwise.

(b) In this part of the Act, the term "seller" includes any person who is in the position of a seller, as for
instance, an agent of the seller to whom the bill of landing has been endorsed, or a consignor or
agent who has himself paid, or is directly responsible for, the price".

2. Remedies of the Unpaid Seller

Remedies of the unpaid seller are either real or personal. Real remedies are remedies against the
goods and are enforceable without judicial intervention. Personal remedies are remedies against the
buyer and enforceable through the courts.

Personal Remedies:

(a) Action for Price

Section 49 provides that the unpaid seller has a right of action for the price of the goods:

(i) Where the property in the goods has passed to the buyer and he refuses to pay for them
according to the contract.

(ii) If the buyer has agreed to pay for the goods on a certain day, and he wrongfully refuses to pay
for them.

(b) Action for damages

Section 50 provides that where the buyer wrongfully neglects or refuses to accept and pay for the
goods (i.e. the property in the goods has not been passed to the buyer) the seller may maintain an
action against him for damages for non-acceptance. The amount of damages will be the estimated
loss caused by the buyer's breach of contract.

Real remedies
(c) Right of Lien or retention of goods

Sections 41 to 43 give the unpaid seller who is still in possession of the goods the right of lien (i.e.
the right to retain them until payment or tender of price ) in the following cases:

(i) Where the goods have been sold on credit but the term of credit has expired.
(ii) Where the goods have been sold without any stipulation as to credit.
(iii) Where the buyer becomes insolvent.

The lien will be lost if the unpaid seller delivers the goods to a carrier or other bailee for transport to
the buyer, without reserving the right of disposal of the goods. It will also be lost where the buyer (or
his agent) lawfully obtains possession of the goods, or where the unpaid seller waives his rights.

Where part delivery has been made, the unpaid seller has a lien over the rest of the goods, provided
that the part delivery already made does not amount to a waiver of the right of lien.

The lien is for the price or for the unpaid balance of price only, and not for any accidental expenses,
such as storage charges.

(d) Stoppage in transitu

Sections 44 to 46 provide that, where a buyer becomes insolvent, the unpaid seller has a right of
stopping the goods "in transitu". This right is exercisable only while the goods are still in transit. If
transit is at an end, the right is also at an end.

Goods are in transit from the time they are delivered to a carrier by land or water or other bailee, for
the purpose of transport to the buyer, until the buyer or his agent takes delivery of them from the
carrier or bailee. If the buyer obtains the goods before they reach the appointed destination the transit
is at an end. The transit is also at an end when the goods reach the appointed destination and the
carrier or bailee informs the buyer that he (the carrier or bailee) holds them on his (i.e. the buyer's)
behalf.

Where part delivery has been made, the right of stoppage in transitu is effective over the remainder
of the articles, unless the part delivery was made in such a way as to show that the seller has agreed
to give up possession of the whole of the goods.

In Dixon v Baldwen it was explained that transit would be if an end of the goods have so far
approached the end of their journey that they await further orders. This is illustrated by Kendall v
Marshall, Stevens and Company, where the railway company which transported the goods gave
notice that after a certain date they would hold the goods not as carriers but as warehousemen. The
goods were not cleared until after the expiration of the time stated, and it was held that the vendor's
lien was lost on the expiration of that time.

The unpaid seller exercises his right of stoppage in transitu either by taking possession of the goods
or by giving notice to the carrier or bailee that he wishes to exercise the right. The carrier or bailee
must then return the goods to the unpaid seller who must pay all the expenses connected with such
return.

In Verschure's Creameries v Hull and Netherlands S.S. Company it was held that if the unpaid
seller gives notice of his right to the carrier, and the carrier ignores such notice, he can sue either the
carrier for damages or the buyer for the price. He can do only one of these things.

Section 47 deals with any sub-sale or pledge by the buyer. It provides that, subject to the provisions
of the Act, the unpaid seller's right of lien or retention or stoppage in transitu is not affected by any
sale, or other disposition of the goods which the buyer may have made, unless the seller has assented
thereto.
 However, the unpaid seller's right of stoppage in transitu is lost if a document of title relating to the
goods has been sent to the buyer and the buyer has endorsed it to another party, who takes it in good
faith and for value, as in Cahm v Pocketts Bristol Channel Steam Packet Co.

(c) Right of Re-Sale

The seller may re-sale the goods under s.48 if the buyer does not pay for the goods, or tender their
price, within the agreed or a reasonable time.

This right of re-sale is allowed in the following three cases:

(i) Where the goods are of a perishable nature.

(ii) Where the unpaid seller gives notice to the buyer of his intention to re-sell, and the buyer does
not within a reasonable time pay or tender the price.

(iii) Where the seller expressly reserves a right of re-sale.

If, in spite of reselling the goods, the seller still suffers a loss, he can bring an action for
damages for non-acceptance, but the first buyer will be discharged from any further liability
to pay the price. Where a seller resells under section 48, therefore, the first contract with the
original buyer is rescinded. If the seller of the goods obtains more for them than the original
contract price, he can retain the whole of the proceeds. The case of R. V. Ward v Bignall
(1967) has held that this is the legal position. The resale terminates the sale and revests title in
the seller for transfer to the second buyer.

Section 48 (2) states that "where an unpaid seller who has exercised his right of lien or
retention or stoppage in transitu re-sells the goods, the buyer acquires a good title thereto as
against the original buyer".

Right to with hold delivery of goods where the property has not passed to the buyer.
Computation of Damages

Section 50 (2) provides that the amount of damages is the estimated loss (to the seller) which
is directly and naturally caused by the buyer's breach of contract. Section 50 (3) further
provides that, where there is an available market for the goods, the measure of damages is the
difference between the contract price and the market or current price at the time when the
goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of
the refusal to accept.

In W. L. Thompson Limited v R. Robinson (Gunmakers) Limited (1955), X Limited

agreed in writing with a company of motor agents to purchase a Standard Vanguard motor
car. Later X Limited refused to accept delivery and the sellers claimed as damages for breach
of contract the amount of profit which they would have obtained on the sale. At the time of
the agreement the demand in the district of Standard Vanguard cars was insufficient to absorb
all such models available for sale, but it was not proved that there was no available market in
the wider sense of the country as a whole. It was held that in the circumstances Section 50 (3)
afforded no defence to X Limited and that the vendors were entitled to the amount of profit
which they had lost by the breach of contract.

The above statutory provisions in effect codify the common law rule in Hadley v Baxendale.

3. Remedies of the buyer

(a) Damages for non-delivery

 Section 51 (1) provides that: Where the seller wrongfully neglects or refuses to deliver the
goods to the buyer, the buyer may maintain an action against the seller for damages for non-
delivery.

Section 51 (2) further provides that "the measure of damages is the estimated loss directly and
naturally resulting in the ordinary course of events, from the seller's breach of contract."

S.51 (3) provides that "where there is an available market for the goods in question the
measure of damages is prima facie to be ascertained by the differences between the contract
price and the market or current price of the goods at the time when they ought to have been
delivered, or, if no time was fixed, then at the time of the refusal to deliver."

(b) Specific Performance

Section 52 states that "in any action for breach of contract to deliver specific or ascertained
goods, the Court may, if it thinks fit, on the application of the plaintiff, by its judgement or
decree, direct that the contract shall be performed specifically, without giving the defendant
the option of retaining the goods on payment of damages. The judgement or degree may be
unconditional, or upon such terms and conditions as to damages, payment of the price, and
otherwise, as to the Court may seem just, and the application of the plaintiff may be made at
any time before judgement or decree". This is the remedy of specific performance.

Judgements for specific performance are usually only made where the goods are unique or of
some special value e.g. an article of special artistic value or of rarity.

(c) Damages for Breach of Warranty

Section 53 provides that, where there is a breach of warranty by the seller, the buyer is not
entitled to reject the goods on that account. He may, however, "set up against the seller, the
breach of warranty in diminution of extinction of the price"; or he may sue the seller for
damages for the breach of warranty. Here again, the measure of damages is the "estimated
loss directly and naturally resulting, in the ordinary course of events, from the breach of
warranty". If the buyer has set up breach of warranty in diminution or extinction of the price,
he is not thereby prevented from maintaining an action for the same breach of warranty if he
suffered further damage.

Where there is breach of warranty of quality, the measure of damages is the difference
between the value of the goods at the time of delivery to the buyer, and the value they would
have had if they had answered to the warranty.

(d) Recovery of price

(e) Rejection of the goods

5.1.17 IMPORT AND EXPORT TRADE

A Kenyan businessman may wish to import goods from another country, or to export his goods to a buyer in
another country. He may do so under one or other of the following standard contracts.

1. F.O.B. Contracts

Under an f.o.b. (free on board) contract it is the duty of the seller to put the goods on board a ship for
the purpose of their transmission to the buyer. The contract of carriage by sea has to be made by, or
on behalf of, the buyer.

The cost of putting the goods on board must be borne by the seller, but once the goods cross the
ship's rail they remain at the risk of the buyer. Delivery is complete when the goods are put on board
 the ship, but the seller should give notice of the shipment to the buyer so as to enable him to insure; if
the seller fails to do this, the goods will be at his risk.

In Colley v Overseas Exporters it was explained that the property in the goods does not pass to the
buyer until the goods cross the ship's rail. If, therefore, the seller is prevented from putting them on
board by failure of the buyer to nominate an effective ship, i.e. a ship able and ready to carry the
goods, the proper remedy of the seller is an action for damages for non-acceptance and not an action
for the price.

2 C.I.F. Contacts

A c.i.f. (cost, insurance, freight) contract is a contract for the sale of goods to be performed by the
delivery of documents representing the goods, i.e. of documents giving the right to have the goods
delivered, or the right, if they are lost or damaged, of recovering their value, from the shipowner, or
from insurers, respectively. The duties of the seller under such a contract were explained in Clemens
Horst v Biddel Brothers and are:

(i) To ship at the port of shipment goods of the description contained in the contract.

(ii) To procure a contract of carriage by sea, under which the goods will be delivered at the
destination contemplated by the contract.

(iii) To arrange for insurance upon the terms current in the trade which will be available for the
benefit of the buyer.

(iv) To make out an invoice for the goods

(v) To tender, within a reasonable time after shipment, the bill of lading, the policy or certificate
of insurance and the invoice to the buyer so that he may obtain delivery of the goods, if they
arrive, or recover for their loss if they are lost on the voyage. The bill of lading tendered must
correctly state the date of shipment, otherwise the buyer can reject the goods: Finlay v Kwik
Hoo Tong.

Under a c.i.f. contract the buyer has a right to reject the documents of title if, on delivery, they show
non-compliance with the terms of the contract. He also has a separate right to reject the actual goods
if, when delivered, they are found not to conform to the contract. For example in Kwei Tek Chao v
British Traders and Shippers Limited. B sold goods to K who were merchants, shipment to be made
by October 31. The goods were shipped on November 3. The date of shipment shown on the bill of
lading was forged to show a shipment in October, but B was ignorant of and not a party to the
forgery. In ignorance of the forgery K paid the price and received the documents, but before the
goods arrived K discovered it. K took delivery, but as the market had fallen was unable to sell the
goods.

Held:

(a) The bill of lading, though forged, was not a nullity as the forgery did not go to the essence of
the contract;

(b) K, although he had not rejected the documents, still had a right to reject the goods and could
recover the difference between the contract price and the market price.

In Panchand v Establissent General Grain Company it was explained that if the buyer accepts the
documents knowing that they are not in order he is stopped from later trying to reject them. In that
case P sold a quantity of Brazilian yellow maize to E. The contract was c.i.f. Antwerp and provided
 that the shipment had to take place from Brazilian ports "during the period of June/July 1965" and
that "bill of lading to be considered proof of date of shipment in the absence of evidence to the
contrary". The goods were, in fact, shipped on August 11 and 12, 1965 but the bill of lading was
antedated and, falsely, gave as the date of shipment July 31, 1965. However, a certificate of shipment
issued by a superintendent company in Brazil stated as date of shipment August 10 to 12, 1965, and
this certificate was tendered together with the bill of lading.

Held:

By taking up the documents and paying for them, the buyers were aware that the goods were shipped
later than provided in the contract and were estopped from complaining of the late shipment or the
defect of the bill of lading.

The duties of the buyer under a c.i.f. contract are:

1. To pay the price, less the freight, on delivery of the documents. He cannot defer payment until
after he has inspected the goods.

2. To pay the cost of unloading, lighterage and landing at the port of destination according to the
bill of lading.

3. To pay all import duties and wharfage charges, if any.

During the voyage the goods are at the risk of the buyer, for whom the seller has insured the goods in
respect of the risk. However, if the goods are lost from a peril not covered by the ordinary policy of
insurance, the buyer must nevertheless pay the full price on delivery of the documents. This is
illustrated by Groom Limited v Barber (1915) in which the defendants sold to the plaintiffs 100
bales of cloth in c.i.f. terms. He shipped the goods, insuring them under a policy which did not cover
war risks. This was customary. The ship carrying the goods was sunk by a German warship. It was
held that he was bound to pay the price on tender of the shipping documents, notwithstanding that the
policy did not cover the risk by which the goods were lost.

The seller is also entitled to the price of the goods even if he knows that the goods have been lost at
the time shipping documents are tendered. The buyer must accept them and pay for the goods:
Mabre Company v Corn Products Company.

3. EX-SHIP CONTRACTS

When goods are sold ex ship, the duties of the seller are-

(i) To deliver the goods to the buyer from a ship which has arrived at the port of delivery at a
place from which it is usual for goods of that kind to be delivered.

(ii) To pay the freight or otherwise release the shipowner's lien.

(iii) To furnish the buyer with delivery order, or some other effectual direction to the ship to
deliver.

In Yangtze Insurance Association v Lukmanjee it was explained that the goods are at the seller's risk
during the voyage and there is no obligation on the seller to effect an insurance on the buyer's behalf.
5.2 HIRE-PURCHASE LAW

5.2.1 Introduction

A person who wants to buy goods but does not have the "money consideration" prescribed by the Sale of
Goods Act as their price may enter into an agreement with their owner whereby he will hire the goods and
ultimately purchase them. Such an agreement is legally known as a "hire-purchase" contract. As a contract,
the agreement is governed by the rules of the common law. However, the common law rules were found to
be unfair in certain respects and, in an attempt to provide a fairer mechanism for forming the contract and
somewhat greater protection for the parties to the transaction, the Hire-Purchase Act (cap 507) was passed
in 1968. The preamble to the Act declares that it is "an Act of Parliament to make provision for the
regulation of certain hire-purchase agreements, and for the licensing of hire-purchase concerns, and for
purposes connected therewith". It should be noted that the Act applies only to "certain hire-purchase
agreements". These are mentioned in S.3 and are:

(i) Hire-purchase agreements entered into after the commencement of the Act under which the hire-
purchase price does not exceed the sum of Shs 80,000.

This provision was amended by the Statute Law (Miscellaneous Amendments) Act 1992 which
provided, with effect from 23rd October 1992, a new maximum limit of Shs 300,000 "or such other
higher or lower sum as the Minister may, after taking into account market forces from time to time
prevailing, prescribe".

(ii) Where the hirer is not a body corporate, wherever incorporated.

(iii) An agreement which is not a scheme controlled, managed or guaranteed by the Government for the
purpose of providing loans to any persons for the purchase of motor vehicles.

5.2.2 Definition

S.2 provides that a "hire-purchase agreement" means "an agreement for the bailment of goods under which
the bailee may buy the goods or under which the property in the goods will or may pass to the bailee".

This definition reflects the practical aspects of a hire-purchase agreement which may take two forms:

(i) Hire and the "option to purchase"

The owner of the goods may agree to hire them to the perspective buyer for a certain period of time,
say 36 months. The prospective buyer in turn promises to pay the agreed amount every month, say
Shs 1,000. He legally becomes "hirer".

At the end of the 36 months, the hirer will have paid a total of Shs 36,000. As far as the owner of the
goods is concerned, this amount constitutes what he would have considered as the fair price for the
goods if the hirer had paid him that amount (or less) under a contract for sale of goods. He is
therefore prepared to let the hirer take the goods.

In order to effect the transfer of ownership to the hirer, the owner of the goods has to sell the goods to
him. He does this by making an "offer" to sell them to the hirer at a nominal consideration of, say,
Shs 20. The hirer is not bound to accept the offer and, in the event of his not doing so, no "purchase"
takes place. If he accepts the offer, a sale takes place and he "purchases" the goods.

In practice, the offer to sell is usually made at the time the hire agreement is concluded. In the
example given above, the offer would be made before the hire agreement is made and would be
incorporated as a term thereof. In such a case, the offer would legally constitute an option to
purchase the goods. Such an offer is irrevocable provided that the hirer performs his obligations
under the hire agreement.
 This type of agreement is covered by the first part of the statutory definition, namely, as an
agreement "under which the bailee may buy the goods".

(ii) Hire

The owner of the goods may agree that the goods will become the property of the hirer on payment
of the final or last instalment. In such a case, the option clause would not be incorporated into the
agreement. This kind of transaction is covered by the second part of the statutory definition and is an
agreement "under which the property in the goods will or may pass to the bailee".

5.2.3 HIRE-PURCHASE AND SALE

The hire-purchase transaction, as explained above, is not a sale because, according to the definition:

(i) There is no seller or buyer. The parties are the "owner" of the goods and the "hirer".

(ii) The hirer may buy the goods but he is not bound to buy them. It is this aspect of the transaction
which constitutes the legal distinction between a hire-purchase agreement and a sale of goods, as was
explained in Hebly v Mathews (45). In a sale of goods, the buyer is bound to buy the goods and, as
already explained, can be sued for their price, or damages, if he refuses to pay for or accept the
goods.

5.2.4 HIRE-PURCHASE AND CREDIT SALE

A Credit sale is a sale on credit. A buyer of goods may be unable to pay the price in full at once and the
seller may let him have possession of the goods before payment in full. It is open to the seller to give credit
to the buyer on whatever terms but once the owner parts possession with the goods ownership passes
immediately to the buyer and the owner loses all his rights against the goods.

A sale on credit terms becomes a credit sale where the price on the goods is payable by five or more
instalments. The property in this case passes on the payment of the first instalment and the owner loses his
rights against the goods. This means the purchaser can give a good title to a subsequent purchase even where
the original purchaser himself has not yet completed the purchase.

Lee v Butler (1893)

Y bought furniture under a credit agreement and resold them to D before he had paid all the instalments. The
original seller sued him for recovery and it was held that the second buyer had obtained a good title as under
credit sale agreements property in the goods passes with the payment of the first instalment.

The distinguishing feature between a hire purchase agreement and a credit sale is that whereas one is a
contract of hire with an option to purchase the other is a contract of sale without any option to purchase. The
hire purchase agreement is between the owner of the goods and the hirer while in a credit sale the parties are
seller and buyer.

5.2.5 HIRE-PURCHASE AND CONDITIONAL SALE

Conditional Sale is an agreement for the sale of goods under which the purchase price or part of it is
payable by instalments and the property in the goods is to remain in the seller (notwithstanding that the
buyer is in possession) until such conditions as to the payment of instalments or otherwise as may be
specified in the agreement are fulfilled.

The conditional sale is the equivalent in a hire purchase agreement in that property in the goods does not
pass with possession and the owner may recover the goods from a subsequent purchaser.

The distinguishing feature however is that this is really a contract of sale where payment is by instalments
while the hire purchase agreement is a contract of hiring with an option to purchase.
 A conditional sale is a sale right from the start but maturing on the fulfilment of certain conditions set out in
the agreement while a hire purchase is a contract of hiring which becomes a sale only upon the exercise of
the option to purchase. The parties in a conditional sale are seller and buyer as opposed to owner and hirer
under the hire purchase agreement.

5.2.6 REGISTRATION OF HIRE PURCHASE AGREEMENTS

Section 4(1) of the Hire Purchase Act establishes a registry of Hire purchase agreements headed by a
Registrar.

Requirements

a) Every Hire purchase Agreement must be in the English language.

b) It must be delivered for registration within 30 days of its execution
c) Payment of a prescribed fee before registration

The Registrar will refuse to register any hire purchase agreement if:

a) The agreement is liable to stamp duty and it is not duly stamped

b) It is not in English language
c) It is lodged for registration out of time (i.e. outside 30 days of its execution)

The Registrar is, however, given discretion under Section 5 to extend the time of registration if satisfied that
failure to register in time was due to some accident or inadvertence or for some other sufficient cause.
Upon registration, he issues a certificate which is Prima facie evidence of its contents.

5.2.7 EFFECTS OF NON-REGISTRATION

(a) Any person claiming under the agreement would not be entitled to enforce the agreement against the hirer or to
enforce any contract of guarantee related to the agreement.

(b) Any contract of guarantee made in relation to the agreements unenforceable.

(c) The owner of the goods would not be entitled to enforce any right to recover the goods from the hirer.

(d) Any person holding security given by the hirer or any guarantor in respect of any payment under the agreement
shall not be entitled to enforce it.

5.2.8 STATUTORY REQUIREMENTS RELATING TO HIRE PURCHASE AGREEMENTS

under section 6(1) before the making of a hire purchase agreement the owner must inform the hirer in
prescribed form (provided in the Act) the price at which he may purchase the goods for cash (cash price).
Where the owner has displayed or advertised the goods this requirement will be deemed complied with if:

a) the hirer has inspected the goods to which labels are attached stating the cash price, or

b) the hirer has selected the goods by reference to a catalogue, price list or advertisement which stated
the cash price.

The owner loses his right to enforce the agreement or any contract of guarantee relating to it if he
fails to comply with this condition.

Section 6 of the Act a hire purchase agreement shall not be enforceable against the hirer unless:—

a) a written agreement is made and signed by the hirer and all parties thereto.

b) the agreement contains a statement or memorandum of:

 i) hire purchase price and cash price of the goods
ii) the amount and dates of payment of each instalment
iii) a notice setting out the hirer's rights under the contract
iv) a description of the goods sufficient to identify them.

c) a copy of the hire purchase agreement is delivered by the owner to the hirer within 21 days of its
maturity.

If any dispute arises over the agreement, the court may dispense with requirements if satisfied that
the hirer has not been prejudiced; however, it cannot dispense with written memorandum on the
terms of the hire purchase agreement.

PROTECTION OF THE HIRER

S.7 of the Act makes certain provisions void if they are contained in the hire purchase agreement, e.g.:

a) any clause that allows the owner to enter the premises of the hirer for the purpose of repossessing the
goods

b) any that relieves the owner of liability for such entry

c) any that restricts or excludes the hirer's right to terminate the hire purchase agreement under S.12

d) any that imposes liability on the hirer in excess of that imposed by S.12 by reason of termination of
the contract by him.

e) any that makes any person acting on behalf of the owner in connection with the formation or
conclusion of the agreement an agent of the hirer

f) any that relieves the owner of liability for the acts or default of any person acting on his behalf in
connection with the formation of the agreement.

5.2.9 IMPLIED CONDITIONS AND WARRANTIES

Section 8 of the Act implies that the following terms in every hire purchase agreement:

a) Right to sell: A condition that the owner will have a right to sell the goods at the time when the
property is to pass

b) Merchantability: A condition that the goods are of merchantable quality, unless the goods are
second hand and the agreement contains a statement to that effect.

c) Fitness for particular purpose: A condition that the goods will be reasonably fit for the particular
purpose for which they are required (if the hirer expressly or impliedly makes known the purpose for
which he requires them).

d) Legal Ownership: A condition that the legal ownership of, and the title to, the goods shall
automatically be vested in the hirer upon payment by him of the hire purchase price in full.

e) Quiet possession: A warranty that the hirer shall have and enjoy the quiet possession of the goods.

f) Free from charge or encumbrance: A warranty that the goods shall be free from any charge or
encumbrance in favour of a third party at the time the property is to pass.

No conditions shall be implied for defects which the owner could not reasonably have been aware of
at the time the agreement was made neither will any conditions be implied where the hirer had
examined the goods or a sample of them in respect of defects which the examination revealed
or ought to have revealed.
 The conditions and warranties implied above cannot be excluded by the agreement (via exclusion
clauses) except for the implied condition of fitness for the particular purpose which can be
excluded if the owner can show that before the agreement such exclusion clause was brought
to the notice of the hirer and its effect made clear to him.

5.2.10 DUTIES OR OBLIGATIONS OF THE HIRER

These are not provided in the Act but are usually found in the agreement itself.

a) Take delivery: Upon entering a hire purchase agreement the hirer is obliged to take delivery of the
goods. In the absence of express or implied terms the place of delivery will be the owner's place of
business or the dealer's premises.

b) Take care of the goods: Most agreements expressly provide the standard of care required of him. In
absence of such provisions the hirer is liable to take reasonable care of the goods but is not liable for
loss or damage not caused by his negligence. If the goods perish without fault the hire purchase
agreement, subject to its express terms, will be discharged.

c) Pay instalments: Once the hirer takes delivery of the goods he must pay the instalments under the
agreement as and when they fall due. If the agreement is terminated before the option to purchase is
exercised all instalments due up to the date of determination must be paid by the hirer.

d) Continue hiring for the agreed period: In most agreements the hiring is for a fixed period e.g. two
or three years and hiree has a right to terminate the agreement at any time before the due date. If he
exercises the option to terminate then the minimum payment clause, also called depreciation clause,
comes into operation and he has to pay some money in respect of depreciation of the goods. If he
does not exercise his option to terminate and instead repudiates the agreement he would be in breach
of contract and liable to pay damages for breach.

e) Notification of change of address: If agreement requires him to record his address and the place
where the goods are then he is obliged to notify the owner of any change of address and removal of
the goods.

Breach of any of these duties may entitle the owner to remedies of termination of the hire purchase
agreement and damages for breach of contract.

DUTIES OF THE OWNER

a) Deliver the goods to the hirer

b) Notification of defects of title or otherwise
c) Indemnity; compensate the hirer for any loss or liability arising by reason of any defects in the goods.

5.2.11 TERMINATION

Under S.12 of the Act the hirer may at any time before the final payment or instalment falls due to terminate
the agreement by:

a) Giving the owner written notice of termination.

b) Returning the goods to the owner.

Upon such termination the hirer is liable to pay all the instalments due by that time plus any sum if any as
will make his final payment not less than half of the total hire purchase price unless a lesser sum is specified
in the agreement. Any provision in the agreement providing for a larger payment than one half of the total
hire-purchase price shall be void.

If the hirer has not taken reasonable care of the goods he shall be liable to pay damages for the failure.
 The hirer should return the goods at his own expense to the premises from which they were supplied to him
or to wherever the owner may direct him. The owner will, however, reimburse him for any additional
expenses incurred in returning the goods to any place other than the premises from where they were initially
supplied from.

5.2.12 COMPLETION OF THE AGREEMENT

The hirer may give written notice of intention to complete the purchase by paying the owner on a specified
day the balance due and having given such a notice complete payment accordingly on that day.

This right may be exercised during continuance of the agreement or within 28 days after the owner
repossessed the goods by paying the owner the balance due and any additional expense the owner may have
incurred such as costs of repossession, storage, repair and maintenance and interest due under the agreement.

5.2.13 RECOVERY OF POSSESSION OF GOODS

Under S.15 where two-thirds or more of the hire-purchase price has been paid the owner is precluded from
enforcing the rights of recovery of possession from the hirer otherwise than by way of suit, unless the hirer
has defaulted in payment or terminated the agreement.

Should the owner violate this provision in repossessing the goods the hire-purchase agreement would
automatically come to an end and:

a) the hirer would be released from any liability under the hire purchase agreement and would be
entitled to recover all sums paid by him or any security given by him.

b) the guarantor would be entitled to recover all sums paid by him or any security given by him.

The owner is not entitled to take any steps to enforce payment of any wrong under the hire-purchase
agreement except by claiming the said sum in a suit or court order.

Pending the hearing of the suit the court may take steps as it may deem necessary for the preservation of the
goods.

On the hearing of the suit the court may make the following orders:

a) for delivery of all the goods to owner

b) for delivery of part of the good to the owner and transfer of title to the goods to the hirer for the
remainder of the goods

c) for delivery of part of the goods to the owner and postpone operation of the order on condition that
the hirer pays the unpaid balance of the hire-purchase price at such terms as the court deems fit. This
provision gives the court the power it professed itself unable to exercise in Nurdin Bandali v
Lombank Tanganyika Limited.

5.2.14 HIRER REQUIRES INFORMATION FROM THE OWNER

If the hirer requires some information from the owner he should send him a written request and pay
to him KShs 10 for expenses. The owner should then within 14 days of receiving the request send to the
hirer a statement duly executed showing the following:
a) the total payment made under the agreement and the date of each payment.
b) the total amount due and unpaid the amount of each unpaid instalment and the date when due.
c) the total amount which is to become due under the agreement and the amount of each instalment
which is to become due and the date when it will become due.

The consequences of failure to comply with a request without reasonable cause are:

a. the person entitled to enforce the agreement against the hirer or any contract of guarantee relating to
the agreement will lose the right to enforce it.

b. the owner loses the right to recover possession of goods from the hirer.

c. the holder of any security given by the hirer or guarantor loses the right to enforce it.

If the default continues for a period exceeding 30 days the owner would be guilty of an offence and is liable
to a fine not exceeding KShs. 500.
REINFORCING QUESTIONS
1. (a) Explain the rights of action which a seller has for breach of contract against the buyer personally.

(b) James agreed to buy 100 tons of wheat from ABC Limited, at £50 per ton. James later refused to
accept delivery of the wheat as the market price of wheat had fallen to £30 per ton. ABC Limited are
now claiming damages.

Advise James.

2. State and explain the rules governing the passing of property under contracts for the sale of goods in cases
where the parties have not indicated an intention that it should pass at any particular time.

3. (a) What is a hire-purchase contract? How does it differ from a:

(i) credit sale contract, and

(ii) conditional sale contract?

(b) Charles buys a second-hand sports car from Peter after reading Peter's advertisement in the local
newspaper. Charles pays Peter in cash the £500 agreed price and takes delivery of the car. Two days
later Charles is visited by a representative of the Bunter Finance Company who informs him that the
car is the subject of a hire-purchase agreement with Peter who has not paid all the instalments.
Charles refuses to surrender the car.

Explain the legal position.

 NEGOTIABLE INSTRUMENTS AND SECURITIES LAW
CONTENTS
1. Read the Study Text provided below
2. Attempt the reinforcing questions given at the end of the lesson
3. Compare your answers with those given in lesson 9
4. Read Chapters 10, 11, 12, 13, 14, and 15 of Hussain

STUDY TEXT

6.1 NEGOTIABLE INSTRUMENTS

6.1.1 Definition: A negotiable instrument cannot be defined with precision, but can be described as a
commercial document which represents money. It passes to a bonafide transferee free from
any defect.

6.1.2 EXAMPLES OF NEGOTIABLE INSTRUMENTS

The common examples of negotiable instruments are:

(a) Cheques—Read S.73 of the Bills of Exchange Act.

(b) Bills of Exchange—Read S.3 of the Bills of Exchange Act, Bearer debentures
(c) Promissory Notes—Read S.84 of the Bills of Exchange Act.
(d) Share warrant, dividend warrant.

The above documents acquired their negotiability by commercial usage in England, which was codified in
1882 in the Bills of Exchange Act 1882.

This Act was introduced in Kenya on 14th May, 1927, and is the current law relating to negotiable
instruments. There are other negotiable instruments in commercial use but they are irrelevant for the
purposes of these notes.

6.1.3 ADVANTAGES OF NEGOTIABLE INSTRUMENTS:

(i) A negotiable instrument provides a creditor with a better remedy, because, once it has been issued (or
accepted where applicable) it settles the amount of the debt owing and makes a legal remedy easier to
obtain than would have been the case under an ordinary contract. For example, there is no need to
explain the terms of the contract which creates the debt.

(ii) A negotiable instrument may be discounted. Thus anybody who holds the instrument, and is
entitled to claim the money on due date, can discount it by taking it to a bank or discounting house. The
bank will in many cases, be willing to take the instrument off the holder's hands, pay him the agreed value
and collect the money when due.

(iii) A negotiable instrument can be negotiated. Anyone who holds a negotiable instrument, such as a bill
of exchange, can transfer it to a creditor in payment and the payee could, if he chose, use it in this
manner to settle his debt with another party.

6.1.4 CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS:

(i) If made payable to bearer, the title to it is negotiable by delivery. If made payable to order, the title to
it passes by endorsement and delivery. Read Sec.31 (2) and 31 (3) of the Bills of Exchange Act.
 (ii) No notice of the transfer is required to be given to the person liable on the instrument.

(iii) The holder in due course may sue on the document in his own name if it becomes necessary, and is
not affected by the privity of contract rule.

(iv) Valuable consideration for it may be constituted by "an antecedent debt or liability" and the common
law rule against past consideration does not apply. Read Sec. 27 (1) of the Act.

NOTE: If the brothers-in-law in Re McArdle had given their sister-in-law a promissory note or bill of
exchange payable after the death of their mother, they would have been liable to her and
ordered to pay the £488.

(v) A bona fide transferee of a negotiable instrument takes it free from any defects in the title of the
transferor, and the common law rule "nemo dat quod non habet" does not apply to negotiable
instruments, unless the instrument is a cheque crossed "not negotiable".

6.1.5 BILLS OF EXCHANGE

A bill of exchange is defined by Section 3 of the Bills of Exchange Act as:

"an unconditional order in writing, addressed by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a
sum certain in money to or to the order of a specific person or to bearer".

£100 Nairobi, 1st November 1993

Sixty days after date pay to the order of Tom Ochieng the sum of one hundred pounds for value received.

To: Paul Kamau Signed:

P O Box 595758
NAIROBI John Onyango

6.1.6 PARTIES TO A BILL

The various parties to a bill are:

(a) The drawer (John Onyango)

(b) The drawee (Paul Kamau)
He becomes the acceptor by writing his name across it.
(c) The payee (Tom Ochieng).

6.1.7 REQUISITES IN FORM

To conform to the statutory definition the document alleged to be a bill of exchange must be:

(a) Unconditional. For example, if the drawer stipulates 'provided that the receipt form at the foot hereof
is duly signed', this is not a bill of exchange since there is a condition imposed: Bavins, Junior and
Sims v London and South Western Bank Limited.

(b) An "order". To say "I shall be pleased if you will pay .... " is not an order but a mere request, but the
expression "please pay..." is a polite order.

(c) "In writing". This includes print and typewriting.

(d) "Signed" by the drawer. However, a person's signature can be put to a bill by his agent.
 (e) An order "to pay". S.3(2) provides that "which orders any act to be done in addition to the payment
of money is not a bill of exchange."

(f) An order to pay a sum "certain in money". S.9 provides that pay a sum is certain within the meaning
of the Act, although it is required to be paid:

(i) with interest;

(ii) by stated instalments;
(iii) by stated instalments, with a provision that upon default;
(iv) according to an indicated rate of exchange or according to a rate of exchange to be
ascertained as directed by the bill. S10(1) provides that a bill is payable on demand, or at
sight, or "on presentation"; or
(v) in which no time for payment is expressed.

(h) Payable "at a fixed or determinable future time; if it is not payable on "3 months after the date" (i.e.
after the date of the bill) or "30 days after.

This maturity date of the bill may be fixed by reference to the occurrence of some event and this will
be valid, provided the event is something that is "certain to happen" e.g. 3 months after my death". If
the event is not certain to happen (e.g. "3 months after I marry") the document will not be a bill of
exchange, and the occurrence of the event will not make it valid.(S. 11 (2))

(j) Expressed to be made "to bearer", (payable to order). This means that the holder of the bill when it
is duly presented for payment i.e. the bill specifies no particular payee, or the only or last
endorsement thereon is "in blank" (s.7).

(k) Payable "to or to the order of" a named payee.

6.1.8 THE PAYEE

(i) Section 7(1) provides that where a bill is not payable to the bearer, the payee must be named
otherwise indicated therein with reasonable certainty.

(ii) Section 7(3) provides that where the payee is a fictitious or non existent person, the bill may
be treated as payable to bearer.

(iii) Section 7(2) provides that a bill may be drawn payable to two or more payees jointly, or be drawn
payable to one of two (or several) payees.

(iv) Section 7(2) also provides that a bill may be drawn payable to the holder of an office.

6.1.9 THE DRAWEE

The following points about the drawee should be noted. S.4(2) (a) provides that:

(i) Where the drawee is dead or bankrupt, or is a fictitious person, or a person not having the
capacity to contract, the holder may treat it as dishonoured by non-acceptance.

(ii) Where the drawee is not indicated with reasonable certainty, but someone "accepts" it, the instrument
may be treated as a promissory note Mason v Lack

(iii) S.6(2) provides that a bill may be addressed to two or more drawees, whether they are partners or not
but an order addressed to two drawees in the alternative, or to two or more drawees in succession, is
not a bill of exchange.

6.2.10 ACCEPTANCE
1. Meaning

The term "acceptance" used in relation to bills of exchange has a special meaning.

Acceptance of a bill of exchange is the signification by the drawee that he accepts the order of the
drawer to pay over the sum stated to the payee. A bill of exchange is used by a debtor to settle his
account with his creditor but, being an order to someone else to pay the sum stated (as opposed to a
promise by the drawer to pay), the creditor is not normally going to take the bill in settlement unless
the drawee acknowledges that he will meet the bill (and, in addition, is a person of substance); until
he does make such acknowledgement, the drawee is under no liability on the bill.

In practice, the bill is normally handed to the payee to present it to the drawee for acceptance. If the
drawee agrees to pay the bill, he will sign his name across it, and by that act he accepts the liability to
meet the bill when it is duly presented for payment.

2. Rules Relating To Acceptance

(a) Presentment for Acceptance

Although a bill must be presented for acceptance and be accepted by the drawee in order to
render him liable on the bill, it is not in fact necessary, as a general rule, for the holder of a
bill to present it for acceptance. He can hold on to it, unaccepted, until maturity or he can
negotiate to a third party, although a bill that has not been accepted will in practice be much
harder to pass on for value.

The only occasions when the Act actually stipulates that a bill must be presented for
acceptance are :

(i) Where the bill is payable at a certain period "after sight". In this case, the bill must be
presented for acceptance in order to fix the maturity date.

(ii) Where the bill expressly stipulates that is shall be presented for acceptance.

(iii) Where the bill is drawn payable elsewhere than at the residence or place of business of
the drawee. (Section 39).

In the case of (i) above, section 40 of the Act qualifies the above, in that the holder of a bill
payable "after sight" need not present it for acceptance if he is able to negotiate it to a third
party within a reasonable time of it coming into his hands. But if he fails either to present the
bill for acceptance or to negotiate it within a reasonable time, then the drawer and all
endorsers prior to the holder will be discharged from liability.

S.41 (1) provides that a bill is presented for acceptance which is presented in accordance with
the following rules-

(i) the presentment must be made by or on behalf of the holder to the drawee or to some
person authorised to accept or refuse acceptance on his behalf at a reasonable hour on
a business day and before the bill is overdue;

(ii) Where a bill is addressed to two or more drawees, who are not partners, presentment
must be made to them all, unless one has authority to accept for all, then presentment
may be made to him only;

(iii) Where the drawee is dead, presentment may be made to his personal representative;

(iv) Where the drawee is bankrupt, presentment may be made to him or to his trustee;
 (v) Where authorised by agreement or usage, a presentment through the post office is
sufficient.

(b) Requisites of Acceptance

S.17 (2) provides that an acceptance is invalid unless it complies with the following
conditions:

(i) It must be written on the bill and be signed by the drawee; the mere signature of the
drawee without further words is sufficient.

(ii) It must not express that the drawee will perform his promise by any other means than
the payment of money.

Acceptance is incomplete and revocable and does not bind the acceptor, until the bill has been
delivered—that is to say, handed back to the person presenting it.

In Baxendale v Bennett: The defendant received from H a draft in blank as to the drawer's
name, writtten in H's handwritting. The defendant wrote his name across the draft as acceptor
and sent it to H who, finding he did not need it, returned it to the defendant. The defendant
placed it in an unlocked drawer in his chambers in the Temple, from which it was taken.
When it came into the hands of the plaintiff, a bona fide holder for value, the document had
been completed by the insertion of the name of W. Cartwright as the drawer. No such person
as Cartwright was known to the defendant, and the name was inserted without his knowledge
or consent. It was held that the defendant was not liable on the document, as, although he had
accepted it, he had not delivered it.

3. Dishonour by Non-Acceptance

If the drawee is not prepared to meet the bill, he will return it to the holder with a note to this effect,
and the bill is then said to be dishonoured by non-acceptance. The holder then knows that the
debtor has given him a valueless scrap of paper, and will commence proceedings against him (the
debtor, the drawer of the bill, not the drawee) to recover his debt. Technically, such action is not an
action on the debt but an action on the bill, for in drawing the bill the drawer "engages that in due
presentment it will be accepted and paid according to its tenor and that if it is dishonoured he will
compensate the holder..." (Section 55(1)).

In certain circumstances, the bill can be treated as dishonoured by non-acceptance without ever
having been presented for acceptance. These circumstances are:

(a) Where the drawee is dead or bankrupt.

(b) Where the drawee is a fictitious person.
(c) Where the drawee is a person not having the capacity to contract.
(d) Where, after the exercise of reasonable diligence, such presentment cannot be effected.
(e) Where, although the presentment has been irregular, acceptance has been refused on some
other ground.

4. Qualified Acceptance

It may be that the drawee is prepared to accept the bill but only subject to some modification. Any
acceptance that varies the effect of a bill as originally drawn is termed as a qualified acceptance. A
qualified acceptance may be any of the following:

(a) Partial
An acceptance to pay only part of a bill; e.g. a bill drawn for the amount of £5,000 may be
accepted for £4,000 only.

(b) Local
 An acceptance to pay the bill only at a certain place; or if the acceptor stipulates that he will
pay the bill at this place only, and nowhere else.

(c) Conditional
An acceptance to pay the bill only at a certain place; the acceptor stipulates that he will pay
the bill on delivery of the bills of landing.

(d) Qualified as to time

An acceptance to pay a bill drawn payable after one month, only after six months.

(e) Acceptance by some only of several drawees

An acceptance will be construed as general unless clearly qualified, the acceptance being
construed most strongly against the acceptor (Smith v Vertue).

If the holder of the bill takes such a qualified acceptance, this has the effect in most cases of
discharging from liability all prior parties to the ball except in so far as any prior party does
not object. In the case of a partial acceptance, prior parties are only discharged if the holder
fails to give notice that he has taken the qualified acceptance. They have no right to object
thereto. On the other hand, the holder of a bill who is offered only a qualified acceptance is
entitled to reject it and to treat the bill as dishonoured by non-acceptance.

6.1.11 TRANSFER OF BILLS OF EXCHANGE (NEGOTIATION)

1. Manner of Transfer

One of the features of bills of exchange is that where A gives B a bill accepted by X in
settlement of his debt, this same instrument may be passed on by B to C in settlement of a debt between
them—both B and C relying on the credit of X. The transfer of a negotiable instrument is termed as
"negotiation", and Section 31 of the Act provides as follows:

(a) A bill is negotiated when it is transferred from one person to another in such a manner as to
make the transferee the holder of the bill.

(b) A bill payable to order is negotiated by the endorsement of the holder completed by delivery.

Transfer of the instrument in this way is enough to vest the property represented thereby in the
transferee and no further formality is required.

Where an order bill is transferred without the endorsement of the transferrer, the transferee is entitled
to call for the missing endorsement to complete this title.

Until this is done, he holds the bill subject to any defence that could be raised against the transferor's
and the endorsement will not have any defect in the transferor's title of which the transferee had
notice before the endorsement was obtained (Whistler v Forster).

The following points should be noted on the question of endorsement:

(a) The endorsement must be written on the bill itself (usually on the back) and signed by the
endorser (Section 32). It usually consists of the words "Please Pay ..." (then the name of the
endorsee) followed by the signature of the endorser. The simple signature of the endorser on
the bill, without additional words is sufficient and is called endorsement "in blank".

(b) An endorsement should always correspond with the drawing. In Slingsby v District Bank
Limited it was held that a bill payable to "AB per X" must be endorsed "AB per X" and not
 "X". (Where the endorsee's name is incorrectly spelt, he should endorse in the incorrect
spelling.)

(c) An endorsement cannot purport to split the bill. If the endorser directs that only part of the bill
is to be payable to the endorsee, or that the bill is to be paid to two or more endorsees
severally, the endorsement is inoperative.

(d) Where the bill is payable to two or more payees or endorsees not being partners, all must join
in the endorsement.

(e) No endorsee is specified in an endorsement in blank, and a bill so endorsed becomes payable
to bearer (Section 34 (1)).

(f) A "special" endorsement specifies to whom, or to whose order, the bill is to be payable
(Section 34 (2)).

It is however, important to note that a bill payable to order can be changed into a bearer bill
by the holder's endorsing it "in blank" can be converted back to an order bill by the holder
adding the name of a particular person to the blank endorsement.

(g) A "restrictive" endorsement is one which prohibits further negotiation of the bill. If a holder
endorses a bill "pay AB only", this operates to destroy the negotiability of the bill, so that no
person taking the bill thereafter can be "a holder" in due course. Such endorsement, as it
appears, operates to prohibit further transfer of the bill, so that no person taking a bill so
endorsed will obtain a title to it even if the transferor's title was perfectly in order.

(h) Conditional endorsement.

2. Transferor's Title (Holder in Due Course)

The position of the transferee of a bill of exchange depends to a large extent on whether or not he is
'holder in due course'.

(a) Holder in Due Course

Section 29 of the Act defines "a holder in due course" as "a holder who has taken a bill,
complete and regular on the face of it, under the following conditions:

(i) That he became the holder of it before it was overdue and without notice that it had
been previously dishonoured, if such was the fact.

(ii) That he took the bill in good faith and for value and that at the time the bill was
negotiated to him, he had no notice of any defect in the title of the person who
negotiated it.

(b) holder for value

This is a holder of a bill of exchange who has actually provided or who is deemed to have
provided consideration on it.

(c) Rights of Holder in Due Course

A holder in due course enjoys the following privileges:

(i) He holds the bill free of prior defects.

(ii) He can pass on this perfect title to a subsequent transferee.
 (iii) He can sue on the bill in his own name.

(c) Holder or Other Holder in Due Course

The holder of a bill of exchange who does not come within the statutory definition of a holder
in due course holds the bill subject to prior equities and his title may be upset if the title of
prior holder was defective; he does have remedies against intervening parties, but the general
rule of "nemo dat quod not habet" applies.

Where the bill has been endorsed by a holder in due course after the defect of title arose, any
person holding the bill thereafter will not be affected by the defect and will enjoy a perfect
title to the bill.

6.1.12 INLAND AND FOREIGN BILLS

1. Distinction between Inland and Foreign Bills

An "inland" bill is defined by S.A(1) as "a bill which is or on the face of it purports to be:

(a) both drawn and payable within East Africa or

(b) drawn within East Africa upon some person resident therein.

The section further provides that "any other bill is a foreign bill".

S.4 (2) provides that "unless the contrary appear on the face of the bill the holder may treat it as an
inland bill". S. 4(3) defines "East Africa" as Kenya, Tanganyika, Uganda and Zanzibar.

6.1.13 BILLS IN A SET

In order to facilitate the international use of bills of exchange, the bill may be drawn in a set of two or more
parts. Each part appears as a bill, but is numbered and contains a reference to the other parts and the whole
of the parts constitutes the whole bill. The different parts of the bill are sent to the drawee by different posts
so as to ensure safe arrival of at least one part. The first part to arrive is accepted, and the other parts when
they arrive in due course are attached to the first part.

There are obvious dangers in this practice, and S.71 makes a number of provisions to deal with the situation:

(a) Acceptance should be written on one part only, and if the drawee accepts more than one part and
various accepted parts get into the hands of different holders in due course, the acceptor will, be
liable on each such part as if it were a separate bill.

(b) When the acceptor of a bill drawn in a set pays it without requiring the part bearing his acceptance to
be delivered up to him, and that part at maturity is outstanding in the hands of a holder in due course,
he is liable to the holder thereof.

(c) Where the holder of a bill drawn in a set endorses two or more parts to separate persons, he is liable
on every such part, and every endorser subsequent to such holder is liable on the part he has
endorsed.

(d) Where two or, more parts of a set are negotiated to different holders in due course, the holder whose
title first accrues is, as between such holder, deemed the true owner of the bill. This provision,
however, is not to affect the rights of a person who in due course accepts or pays the part first
presented to him.
6.1.14 DISCHARGE OF BILL

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

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

(a) "Payment in due course", (S.5 (a)). This means "payment made at or after the maturity of the bill to
the holder thereof in good faith and without notice that his title to the bill is defective" (S.59 (1)(b)).

(b) Acceptor the holder at maturity

When the holder of a bill is or becomes the holder of it at or after maturity in his own right. This is
known as a merger.

(c) Non-presentation for payment

(d) Renunciation or waiver

When the holder of bill at or after its maturity, absolutely and unconditionally renounces his rights
against the acceptor. (S. 62 (1)). This is known as "waiver".

(e) Cancellation

Where a bill is intentionally cancelled by the holder or his agent, and the cancellation is apparent
thereon (S.63 (1)). S. 64 (1) provides that where a bill or acceptance is materially altered without the
assent of all parties liable on the bill, the bill is avoided, except against a party who has himself
made, authorised or assented to the alteration, and subsequent endorsers.

(f) Material alteration – Section 64(1) of the Act.

6.1.15 ACCOMMODATION BILLS

An accommodation bill is a bill drawn, accepted, and put in to circulation without any consideration passing.

An accommodation party to a bill is a person who has signed a bill as a drawer, acceptor or endorser without
receiving value therefore, and for the purpose of lending his name to some person.

An accommodation party is liable on the bill to a holder for value; and it is immaterial whether, when such
holder took the bill, he knew such party to be an accommodation party or not.

6.1.16 NOTING AND PROTESTING

"Noting" or "protesting" of a bill occurs in the event of a bill of exchange being dishonoured.

(i) Noting the bill is making of a minute by a Notary Public, who has to present the bill either at the
acceptor's office if it is made payable there, and if made payable at a bank then to that bank, and gets
the answer given for non-payment of the bill. Then he affixes to the bill a slip of paper which has
briefly typed (or written) on it the fact that he presented this bill to "......" and that it was dishonoured
by non-payment with answer (specified). He then appends his signature and affixes a stamp, this
being the stamp required on a legal document.

(ii) "Protest" is a more formal form of noting. Sections 51 (7) provides that a protest must contain a copy
of the bill, and must be signed by the notary making it, and must specify:

(a) the person at whose request the bill is protested;

 (b) the place and date of protest, the cause or reason for protesting the bill, the demand made, and
the answer given, if any, or the fact that drawee or acceptor could not be found.

6.1.17 REFEREE IN CASE OF NEED

The drawer of a bill and any endorser may insert the name of a person on the bill to whom the holder of the
bill may resort in the event of a bill being dishonoured. The holder has the option whether or not he will
obtain payment from the referee in the case of need, but if he does so the bill must be noted before the action
is taken.

When the drawee of a bill refuses to accept a bill of exchange, some other person may step in and offer to
accept the bill in his place for the honour of the drawer or an endorser. This can only be done if the
following conditions are satisfied.

(a) The holder agrees to such acceptance.

(b) The bill is not overdue.
(c) The person accepting "for honour" must not already be a party to the bill.
(d) The bill must first be noted or protested.

The acceptance must show clearly that it is an acceptance for honour and should indicate the person for
whose honour he accepts. If no person is named, it is presumed to be for the drawer's honour.

The acceptor for honour engages that he will, on due presentment, pay the bill according to the tenor of his
acceptance if it is not paid by the drawee, provided that it has been duly presented for payment, and
protested for non-payment, and that he receives notice of these facts. He is liable to the holder of the bill and
to all parties to the bill subsequent to the party for whose honour he has accepted.

If an acceptor honour pays, his rights are those of a payer for honour.

When a bill is dishonoured by non-payment, any person may intervene and pay it supra protest for the
honour of any party liable thereon. Before such payment is made, the bill must be noted and protested and
the protest must be attended by a declaration on the part of the person making payment that he is paying the
bill for honour and for whose honour he is paying.

Where the bill is paid for honour in this way, all parties subsequent to the party for whose honour the bill is
paid are discharged, but the person making payment for honour is subrogated to the holder (stands in his
place, with the same rights and duties) as regards the party for whose honour he has paid and all prior parties
liable to that party.

6.1.18 MEASURE OF DAMAGES

In the event of a bill being dishonoured, the holder and, in turn, every other party to the bill who is
compelled to pay it, may recover from any proceeding party liable:

(a) The amount of the bill.

(b) Interest by way of damages, such interest to be calculated from the date of presentment for payment
if the bill is payable on demand, and from the date of maturity of the bill in any other case.

(c) The expenses of noting and (if necessary) protesting the bill.

6.1.19 LOST BILLS

Section 6a provides:

(1) "Where a bill has been lost before it is overdue, the person who was the holder of it may
apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to
indemnify him against all persons whatever in case the bill alleged to have been lost is found again.
 (2) If the drawer on request as aforesaid refuses to give such duplicate bill, he may be compelled to do
so." As it is possible that the lost bill may get into the hands of some person who takes it innocently,
it is possible under certain circumstances for the drawer to be called upon to pay both the original and
the duplicate instrument. It behoves him, therefore, to satisfy himself before he issues a duplicate that
the original is in fact lost or destroyed and, in addition, to see that adequate security is granted to him
against the eventuality.

6.1.20 OVERDUE BILLS

A bill is overdue:

(a) In the case of a bill payable 'on demand', when it has been in circulation for more than a reasonable
length of time. What is a reasonable time is a question of fact to be determined in each case.
(b) In the case of a bill payable on a fixed or determinable future date, prima facie on that date.
However, three "days of grace" are always added (unless the bill is drawn 'without grace'), so that a bill
prima facie payable on 24th February will not in fact be deemed to be overdue until 28th February. In this
connection:

(i) If the last day of grace is a Sunday, Good Friday, Christmas Day or a Day of Public
Thanksgiving, the bill is due on the preceding day at the latest.

(ii) If the last day of grace is a Bank Holiday, then the bill is due on the next succeeding day at the
latest.

In calculating days, the day from which the time starts to run is excluded but the day of payment is
included, so, "10 days after date", the bill being dated on Ist July, plus 3 days of grace, i.e. to 14th
July. If the period for maturity is expressed in months, this means calender months. A bill dated 31st
January due one month after date will fall due on 28th or 29th February; as the case may be, but
adding days of grace on, the 3rd of March in either case. A bill dated 31st January and payable "30
days after date" will be due on 2nd March in an ordinary year and Ist March in a leap year, again,
with three days of grace to be added.

6.2 CHEQUES

6.2.1 DEFINITION

S.73 of the Bills of Exchange Act defines a cheque as follows:

"A cheque is a bill of exchange drawn on a banker payable on demand"

6.2.3 REQUISITES IN FORM

A cheque, being a bill of exchange, must conform to the requisites prescribed by the Bills of Exchange Act
as necessary to constitute a bill, namely:

It must be unconditional.

Instruments which require as a condition of payment the signing of a particular form of receipt are
not cheques: Bavins, Junior and Sims v London and South Western Bank.

However, where the condition is not imposed on the drawee or banker but is addressed to and affects
only the payee or holder, this does not make the cheque conditional.

In Bavins, Junior and Sims v London and South Western Bank Limited the Court of Appeal
(England) had to deal with an instrument in the form of a cheque given to the plaintiffs by the Great
Northern Railway Company for work done. The instrument read as follows:
 "The Great Northern Railway Company No.1 Accountants drawing account London, 7 July 1898,
the Union Bank of London Limited ... Pay to J. Bavins Jnr and Sims the sum of sixty-nine pounds
seven shillings, provided the receipt form at the foot hereof is duly signed, stamped and dated £69
7s".

It was held that the instrument was not a cheque within the definition given by the Bills of Exchange
Act, 1882 (which is the identical with the Kenya Bills of Exchange Act) because it was not an
unconditional order. The bank was not to pay the instrument unless the receipt was signed.

The bank lost its protection because the instrument was not a cheque and had been collected by the
bank for a person who had stolen it. The bank was liable in conversion to the true owner, Bavins.

NOTE:

(i) Bankers usually obtain an indemnity from customers having receipt forms on their cheques.
This indemnity protects the bank if it incorrectly treats an instrument requiring a receipt as a
cheque, although the bank should be protected by the Cheques Act, 1968.

(ii) Receipts on the backs of cheques are not common now because of S.4(2) of the Cheques Act
1968 which provides that a prescribed instrument which is not endorsed but which appears to
have been paid by the banker on whom it is drawn is evidence that the payee has been paid
by the banker the sum of money specified in the instrument.

(iii) Where receipts are used they must, by reason of banking practise, carry a large "R" on the
face because bankers are not required to look for endorsements on cheques under the Cheques
Act 1968. Furthermore, if an unconditional instrument was not regarded as a cheque a banker
should still be protected by the Cheques Act, 1968 since it protects a banker who collects an
instrument which is not a cheque or pays an instrument which is not.

In Nathan v Ogdens Limited (1906) the instrument had printed on its face the words "The receipt at
the back hereof must be signed, which signature will be taken as an endorsement of the cheque".

It was held that the order to pay was unconditional and therefore the cheque was valid. The words
could be taken as addressed to the payee and not to the bank.

It must be an order.

A cheque must be an order; it must be imperative in its terms, not precative, though the insertion of
mere terms of courtesy will not make it precative.

It must be addressed by one person to another

A cheque must be addressed by one person to another. There must be one person as drawer, another,
a bank, as drawee.

The head office and branches of a bank constitute for this purposes only one legal entity. It is for this
reason that drafts by one branch of a bank on another branch or head office are not cheques or bills
so far as the bank is concerned. This was explained in London City and Midland Bank Limited v
Gordon.

. It must be signed by the person giving it

Under S.23 of the B.E.A. "no person is liable as drawer, endorser or acceptor of a bill who has not
signed it as such". Section 24 of the Act further provides that a forged signature on a bill is "wholly
 inoperative": unless the party against whom it is sought to retain or enforce payment of the bill is
precluded from setting up the forgery.

If must be payable "on demand"

S.10 of the Bills of Bills of Exchange Act provides that a bill is payable on demand:

(a) which is expressed to be payable on demand or at sight or on presentation; or

(b) in which no time for payment is expressed. Because a cheque is payable on demand, it cannot
be "accepted": Punjab National Bank v Bank of Baroda.

The sum payable must be a sum "certain in money"

Section 9 provides that the sum payable by a bill of exchange is a sum certain within the meaning of
the Act although it is required to be paid:
(a) with interest;

(b) by stated instalments;

(c) by stated instalments, with a provision that upon default in payment of any instalment the
whole shall become due;

(d) according to an indicated rate of exchange or according to a rate of exchange to be ascertained

as directed by the bill.

S.9 (2) also provides that where the sum payable is expressed in words and also in figures, and there
is a discrepancy between the two, the sum denoted by the words is the amount payable.

It must be payable to, or to the order of, a specified person.

This provision is already explained in paragraph 6.1.8. However, cheques are sometimes drawn "pay
cash". "Cash" cannot be a payee but bankers generally treat cheques so drawn as payable to bearer
after the holder has endorsed it in blank.

6.2.3 DIFFERENCES BETWEEN CHEQUES AND OTHER BILLS OF EXCHANGE

The following are some of the differences between cheques and other bills of exchange:

(a) A cheque is drawn on a drawee called "banker" and cannot be drawn on any other drawee.

A bill of exchange which is not a cheque can be drawn on anybody, whether an individual, a firm or
a body corporate.

(b) A cheque is payable on demand and cannot be paid at a fixed or determinable future time.

A bill of exchange which is not a cheque can be drawn payable at a fixed or determinable future
time.

(c) Because it is payable on demand, a cheque cannot legally be accepted by the drawee: Bank of
Baroda v Punjab National Bank.

A bill of exchange other than a cheque can be accepted if it is not drawn payable on demand but is
payable at a fixed or determinable future time.

(d) A cheque can be crossed while other bills of exchange are not legally crossed.
6.2.4 NON-PAYMENT OF CHEQUES:

A banker's authority to pay a cheque will be determined or terminated by:

(a) Countermand of payment, under s.75 (a).

The Act does not prescribe the mode in which the countermand is to be effected. It may therefore be
done orally or in writing. However, as a means of obtaining the evidence of the countermand,
bankers usually require a written notice.

A cheque is countermanded when the drawer instructs the bank not to honour the cheque when
presented for payment. To be effective, therefore, the notice must be given to the banker before the
cheque is paid. If, despite the countermand, the bank pays the cheque, it will be liable to refund the
money to the drawer: Burnett v Westminster Bank Limited.

(b) Notice of the customer's death

Cheques drawn by a customer before his death are valid but as a precaution the banker will not
honour them.

(c) the customer’s account has insufficient funds

(d) Notice of the presentation of a bankruptcy petition against the customer.

This terminates a banker's authority because of technical reasons under the Bankruptcy Act.

(e) Where the cheque has been altered.

(f) Where the cheque is irregular

(g) Garnishee Order

A Garnishee Order is an order of the Court to a bank manager freezing the account of a customer till
further notice from the court.

(h) Insanity of the drawer.

6.2.5 RELATIONSHIP BETWEEN BANKER AND CUSTOMER:

The relationship between a banker and the customer is a debtor-creditor relationship which was articulated
in the leading case of Joachimson v Swiss Bank Corporation and may be summarised as follows:

(i) If the account reflects a credit balance, the banker is a debtor and the customer a creditor of the bank.

(ii) If the account reflects a debit balance, the customer is the debtor and the banker a creditor of the
customer.

The banker as a debtor is not under any legal obligation to repay the "loan" unless and until an effective
demand for repayment is made by the customer.

6.2.6 CROSSED CHEQUES

A crossing on a cheque may be general or special.

(a) General Crossing

S.76 (1) provides that where a cheque bears across its face an addition of:

(a) The words "and company" or any abbreviation thereof between two parallel transverse lines,
either with or without the words "not negotiable", or ;

(b) two parallel transverse lines simply, either with or without the words "not negotiable", that
addition constitutes a crossing, and the cheque is crossed generally"

The following are the general crossings provided for by this provision:

(b) Special Crossing

S.76 (2) provides that "where a cheque bears across its face an addition of the name of a banker,
either with or without the words "not negotiable", that addition constitutes a crossing, and the cheque
is crossed specially and to that banker".
 The following are examples of Special Crossing:

National Bank of
Pay to A. Bank
for collection

Harambee
Avenue

Nairobi
signed:

Kenya
S.77 provides that:

(a) A cheque may be crossed generally or specially by the drawer.

(b) Where a cheque is uncrossed, the holder may cross it generally or specially.

(c) Where a cheque is crossed generally, the holder may cross it specially.

(d) Where a cheque is crossed generally or specially the holder may add the words "not
negotiable".

(e) Where a cheque is crossed specially, the banker to whom it is crossed may again cross it
specially to another banker for collection.

(f) Where an uncrossed cheque, or a cheque crossed generally, is sent to a banker for collection,
he may cross it specially to himself.

The essence of a general crossing are the two parallel transverse lines while the essence of a special
crossing is the addition of the name of a banker.

6.2.7 EFFECT OF A CROSSING

The effect of the various crossings are as follows:

(i) The "Not Negotiable" Crossing

"The "not negotiable" crossing is often misunderstood, many people believing that a cheque so
crossed is not transferable, but payable only to the payee through his banker. Even Lindley L. J., in
National Bank v Silke (1891), uses words which might be so interpreted. "Not negotiable" is often
intended to mean not transferable, and it is only by reference to S.81 (of the Bills of Exchange Act)
that the true effect of the crossing is arrived at. The effect is that the cheque remains transferable,
but is deprived of the full character of negotiability. However honestly and for value a transferee
may take it, he cannot acquire any better title to the cheque or its proceeds, or any better right against
any prior party to it, than his transferor had. So long as there is no defect of title, or failure of
consideration the cheque may pass from hand to hand just as if it was an open cheque or a simply
crossed cheque, and each successive holder acquires full rights and title thereon". (Paget's Law of
Banking, 8th Edition, pp:250 - 251).

In Great Western Railway Company v London and County Banking Company (1900) Lord Lindley
stated:
 "Everyone who takes a cheque marked 'not negotiable' takes it at his own risk, and his title to the
money got by its means is a defective as his title to the cheque itself... Whether the (title to) cheque
was void or only voidable ... appears to me really immaterial. Be it void or be it voidable, it was not
negotiable; and by s.81 of the Bills of Exchange Act Higgins (the holder) was not capable of giving
a better title to the cheque than he had himself."

However, it should be noted that the words "not negotiable" have no statutory effect unless combined
with one of the regular crossings. A cheque bearing these words without one of the regular crossings
is not a crossed cheque.

In Wilson and Meeson v Pickering the plaintiffs drew a cheque in blank after crossing it 'not
negotiable'. They told the secretary to write in X's name as payee and a specific amount. The
secretary dishonestly wrote in the defendant's name and a larger amount and gave it to him in
settlement of her personal debt. It was held that, as the Secretary had no title to the cheque, the
defendant had also no title to the cheque and, despite his innocence, he must refund to the plaintiff
the money which he had been paid by the plaintiff's bankers.

(ii) The "Account Payee" Crossing

"Words such as 'account payee', 'account of A.B' are frequently added to the crossing of a cheque.
They are in no way authorised or recognised by the Bills of Exchange Act... National Bank v Silke
(1891) shows that such an addition to the crossing does not prevent the cheque from being
transferable ... It may, however, be briefly stated here that, apart from the possible question of the
duty of the paying banker where these words are found together with endorsements—an obviously
inconsistent combination—the words only constitute a direction to the collecting banker,
signifying the account to which the proceeds of the cheque when received are to be placed,
which he disregards at his peril. If received by that banker for anyone other than the customer
indicated, such receipt is not 'without negligence', and excludes the banker from the protection of
S.82 (of the bills of Exchange ... even though the crossed cheque be payable to 'A.B. or bearer'.
(Paget's Law of Banking, 8th Edition, p.256 - 257).

In Bevan v National Bank, Limited it was held that it would be negligence to take a cheque marked
'account payee' for an account other than that of the payee.

In Morison v London County and Westminster Bank Limited Lord Reading stated:

"The words 'account payee' ... are only to be found on the crossed cheques made payable to Abbot or
Order or Abbott or bearer, defendants or bearer and defendants or order. The words 'account
payee' are a direction to the bankers collecting payment that the proceeds when collected are to be
applied to the credit of the account of the payee designated on the face of the cheque".

The now general practice of bankers, except where the customer is undoubted, is to collect crossed
cheques marked 'account payee' for the account of the payee designated on the face of the cheque and
not for any other account.

(iii) "Account 'Payee' Only" Crossing

"It would seem to follow, ... that the only meaning which can be given to the word 'only' is that it
requires the paying banker to pay the payee only, in account, which would mean that the collecting
banker must indemnify the paying banker either specifically or pursuant to the general agency
arrangements between the banks. The same effect could, of course, be reached by drawing the
cheque in favour of the payee 'only'. On the whole, it would seem wise for banks to discourage the
use of the word "only" and for the drawer to be content with the protection afforded by the use of
"account payee" simply. In no sense is he justified in placing an extra burden on the banks". (Paget's
Law of Banking, 8th Edition, pp.259 - 260).
6.2.9 CROSSING A MATERIAL PART OF A CHEQUE

S.78 provides that "a crossing authorised by this Act is a material part of the cheque; it shall not be lawful
for any person to obliterate or, to add or to alter the crossing".

6.2.10 LEGAL PROTECTION OF BANKERS

1. Paying Banker
A paying banker is protected by the following:

(i) Bills of Exchange Act, S.60

(a) Subsection (1)

(i) This subsection is concerned only with indorsement and affords no protection to the
banker where the customer's signature as Drawer is forged. An instrument
purporting to be a cheque, but to which the drawer's signature is forged, is not a
cheque at all, is not drawn on a banker and is outside the subsection altogether.

(ii) The protection conferred by the subsection is limited to "bills" and does not extend to a
banker's draft: London City and Midland Bank Limited v Gordon.

(iii) The words "deemed to have paid the bill in due course" are intended to equate the
person in possession of a cheque under a forged indorsement with a holder in due
course, and to protect the banker accordingly. This is a purely technical provision
since, as a matter of substantive law, a person in possession of a cheque under a forged
indorsement is, UNDER s.24 of the Bills of Exchange Act, neither payee, indorsee nor
bearer to whom a payment can ever be a payment in due course within S.59(1).
Section 24 declares total inefficacy of a forged indorsement to convey any title or the
right to give a discharge.

(b) Subsection (2)

(i) This subsection incorporates S.19 of the U.K. Stamp Act 1853 into the Bills of
Exchange Act and regulates the protection of the banker with regard to drafts or
orders which are not cheques or bills within the definition in the Bills of Exchange
Act.

(ii) It does not expressly require the payment to be made "in good faith" and in the
ordinary course of business".

2. (ii) Bills of Exchange, Act S.80

A banker paying a crossed cheque bearing a forged indorsement is protected against his own
customer and against the true owner of the cheque provided that he paid the cheque IN
GOOD FAITH AND WITHOUT NEGLIGENCE.

(iii) The Cheques Act 1968, S.3

The protection which this section offers is additional to that given by ss.60 and 80 of the Bills
of Exchange Act and, therefore, the banker is entitled to whatever advantage he can gain from
all or any. It specifically protects the banker in cases where the indorsement is irregular or
absent.
3. Collecting Banker

A collecting banker is protected by the following provisions:

(i) Bills of Exchange Act.

S.82 (1) provides that where a banker in good faith and without negligence receives payment
for a customer of a cheque crossed generally or specially to himself, and the customer has no
title or a defective title thereto, the banker shall not incur any liability to the true owner of
the cheque by reason only of having received such payment.

(ii) The Cheques Act, S.32 (2).

In Capital and Counties Bank Limited v Gordon the legal conception of the collecting
banker was that of a mere conduit pipe, receiving the cheque from the customer and then,
and not till then, placing it to the customer's credit, exercising function strictly analoguous
to those of a clerk of the customer sent to a bank to cash an open cheque for his
employer.

In that case the House of Lords held that the bank had not acted as such conduit pipe, had not
received payment for the customer but for itself and so lost the protection of S.82 of the Bills
of Exchange Act 1882, because it had credited the customer with the face value as cash on
receipt for collection and before clearing. This has been changed by S.82 (2) of the Kenya
Act.

(iii) The Cheques Act 1968 S.4

Unless the banker can bring himself within the conditions formulated by the section, he is left
with his common law liability for conversion or money had and received, in the event of the
person from whom he takes the cheque for collection having no title or a defective title
thereto.

In Turner v London and Provincial Bank Limited (1903) evidence was admitted, as proof
of negligence, that the customer had given a reference on opening the account and that this
was not followed up.

In Ladbroke & Company v Todd the bank was held negligent because they did not make
enquiries about a proposing customer. This was described as an ordinary precaution other
banks took—bankers or bank officials having given evidence that they made enquiries in such
cases.
6.3 PROMISSORY NOTES

6.3.1 Defination

S.84 (1) defines a promissory note as "an unconditional promise in writing made by one person to another
signed by the maker engaging to pay, on demand or at a fixed or determinable future time, a sum certain in
money, to, or to the order of a specified person or to bearer". S.84 (2) provides that an instrument in the form
of a note payable to maker's order is not a note within the meaning of S.84 (1) unless and until it is endorsed
by the maker.

6.3.2 Specimen

The following is one form of promissory note:

Nairobi,
July 1, 1993

I promise to pay on demand XYZ or order the sum of £100 for value received.

Signed
AB.

6.3.3 Liability of maker

S.89 provides that the maker of a promissory note by making it:

(a) Engages that he will pay it according to its tenor; and

(b) Is precluded from denying to a holder in due course the existence of a payee and his then capacity to
endorse.

S.90(3) provides that the following provisions as to bills do not apply to notes namely, provisions relating to:

(a) Presentment for acceptance;

(b) Acceptance;
(c) Acceptance supra protest;
(d) Bills in a set.

Where a foreign note is dishonoured, protest thereof is unnecessary.

6.4 Securities Law

6.4.1 Contracts of guarantee

A contract of guarantee or suretyship is a contract by one person to answer for the debt, default or
miscarriage of another. Whether a particular contractual promise constitutes a guarantee depends upon the
words used to express the intentions of the parties.

In order to understand the nature of guarantee, consider the following example.

Onyango is in need of some goods but does not have the money to pay for them. He asks Mutiso, a rich
friend of his, to go with him to Kamau's shop in order to persuade Kamau to sell the goods to him
(Onyango) on credit. Mutiso agrees and they go to Kamau's shop. In the course of their conversation with
Kamau Mutiso tells him:

"Let Onyango have the goods, and if he does not pay you, I will".

These words legally constitute a contract of guarantee and Mutiso is said to have guaranteed the credit sale
to Onyango.

The characteristics of a contract of guarantee are:

(a). There must be three parties: the creditor, the debtor and the guarantor or surety.

(b) There must be a primary liability in some person other than the guarantor; the guarantor must be
liable only secondarily, to pay if the debtor does not pay.

The assumption of personal liability is not essential in a guarantee. The provision of security is
enough: Re Conley.

(c) The guarantor is totally unconnected with the contract except by means of his promise to discharge
the debtor's liability if he does not do so.

(d) Must be evidenced by some note or memorandum.

6.4.2 Contracts of Indemnity

Indemnity is the undertaking of primary responsibility to see that a certain act is performed.

Whether a particular contractual promise constitutes an indemnity depends upon the words used to express
the intentions of the parties. If in the example given above Mutiso had told Kamau:

"Let Onyango have the goods, I will see you paid", these words would legally constitutes a contract of
indemnity.

A contract of indemnity differs from a guarantee in the following respects:

(a) There are only two parties.

(b) The person giving the indemnity is primarily liable and there is no secondary liability.

(c) The person giving the indemnity has some interest in the transaction apart from his indemnity.
6.4.3 Liability of the guarantor

A guarantor's liability does not arise until the principal debtor has made default, although notice of the
default need not be given to him unless it is expressly agreed to be given. It is not necessary for the creditor
to request the debtor to pay or to sue the debtor, unless this is expressly stipulated for, before taking
proceedings against him.

If the transaction is void as between the principal debtor and the creditor, the guarantor is not bound: Coutts
& Company v Browne-Lecky.

Similarly the guarantor is not bound if the principal debtor is discharged, e.g. by statute: Unity Finance
Limited v Woodcock (1963) 1W. LR. 455.

Any conditions precedent to the guarantor's liability must be fulfilled before recourse can be had to him.

If several guarantors have agreed to become co-sureties for definite amounts, and the creditor allows the
amounts to be altered by one guarantor without the consents of the others, the guarantee will not be binding.
This can be illustrated by the case of Ellesmere Brewery Company v Cooper (1896) 1&.B.75, in which the
facts, briefly, were as follows:

A firm of brewers employed C and required him to execute a bond with sureties for the faithful discharge of
his duties. The bond was drawn up with four sureties, N. and E. being liable to the extent of £50 each, and P
and B. to the extent of £50 each, and P and B to the extent of £25 each. P, B and E all signed, but N, who
was the last to sign, added "£25 only" to his signature. The brewers accepted the bond so signed. It was held
that none of the guarantors was liable on the bond.

6.4.4 Continuing guarantees

A continuing guarantee is a guarantee which extends to a series of transactions, and is not exhausted by
or confined to a single credit or transaction. The liability of the guarantor in such a case extends to all the
transactions contemplated until the revocation of the guarantee.

Whether a guarantee is continuing or not depends on the language of the guarantee, the subject-matter and
the surrounding circumstances. An example would be the guarantee of a company's overdraft by the
directors up to a specified limit during a given period, e.g. 2nd January to 31st December.

Guarantor's rights against the creditor

The rights of the guarantor are:

(a) At any time after the guaranteed debt has become due and before he has been asked to pay it, to
require the creditor to sue for and, collect the guaranteed debt: Rouse v Bradford Banking
Company (1894) 2 ch, 75.

(b) On being sued by the creditor, to rely on any set-off or counterclaim which the debtor possesses
against the creditor.

(c) On payment of what is due under the guarantee, to be subrogated to all the rights of the creditor in
respect of the debt to which the guarantee relates: Re Lamplugh Iron ore Company Limited
(1927) 1 Ch.308.

(d) On payment of what is due under the guarantee, to have assigned to him every judgement or security
held by the creditor in respect of the debt.

(e) On payment of what is due under the guarantee, to all equities which the creditor could have
enforced not only claiming through him: Imperial Bank v London and St. Katherine Docks
Company. (1877) 5 Ch. D. 195.
6.4.5 Guarantor’s rights against the debtor

The guarantor's rights against the debtor are:

(a) Before the payment has been made, to compel the debtor to relieve him from liability by
paying of the debt. This right can be exercised by one of several co-sureties without consulting the others.

(b) After payment has been made, to be indemnified by the principal debtor against all payments
properly made.

A right to indemnify arises immediately a payment has been made under the guarantee, and on
payment the guarantor becomes a simple contract creditor of the principal debtor. He is entitled
to recover the amount he has paid with interest, and if he has sustained damage beyond that, he is
entitled to recover that damage also in Bradeley v Consolidated Bank (1887) 34 Ch. D., 556
Stirling, J. stated:

"If a surety could prove that by reason of non-payment of the debt he had suffered beyond the
principal and interest which he had been compelled to pay, he would be entitled to recover that
damage from the principal editor".

(c) When sued by the principal creditor, the guarantor can issue a third party notice against the
principal debtor and claim an indemnity.

6.4.5. Rights of co-guarantors among themselves

A guarantor who has paid more than his share under the guarantee is entitled to contribution from his co-
guarantors, whether they are bound by the same or different instruments, and whether he knew or not of the
existence of co-guarantors at the time he became bound. This is because the doctrine of contribution is not
founded on contract, but is the result of general equity on the ground of equality of burden and benefit.

To obtain contribution, all the guarantors must have guaranteed the same debt. There is, therefore, no right
of contribution.

1. When each guarantor has expressly agreed only to be liable for a given portion of one sum of money.

2. When guarantors are bound by different documents for equal portions of a debt due from the same
principal, and the guarantee of each is a separate and distinct transaction.

6.4.6 Discharge of the guarantor

The guarantor will be discharged in the following events:

(a) If the contract between the principal debtor and the principal creditor is varied without the consent of
the guarantor: Holme v Brunskill (1877) 3 Q.B.D. 495.

(b) If the creditor makes a binding contract to give time to the principal debtor.

Mere omission to press the debtor or delay in suing him is not such conduct as to release the
guarantor. The contract, to have this effect, must be one which is legally enforceable.

In Croydon Gas Company v Dickinson P and C guaranteed the performance by D. of his contract
with a gas company. Under that contract, D. undertook to pay for each month's supply within 14
days. In July the company not being paid in 14 days took a promissory note from D. It was held that
this was binding agreement to give time and discharged P and C from liability for the July account.
 (c) If the creditor omits to do something which he is bound to do for the protection of the surety, such as
omitting to take up an award until the time for its performance is past (Re Jones), or if he omits to
register a deed giving security so that the deed becomes inoperative and the creditor unsecured.

(d) If the creditor relinquishes any security held by him in respect of the guaranteed debt. On payment of
the debt the guarantor is entitled to have handed over to him all the securities held by the creditor in
respect of the debt in the same condition as he received them. If the creditor, by any act or neglect on
his part, is unable to hand over the securities in their unimpaired condition, the guarantor will be, to
that extent, discharged.

In Re Darwen and Pearce (1927)1 Ch. 176, X and Y held partly paid shares in a company and D
and P guaranteed the payment of their unpaid calls to the company. The company called upon X and
Y to pay the calls and, on default being made, forfeited the shares under a power given in the
articles. It was held that the company, by forfeiting the shares, had deprived D and P of lien on
shares to which they would have been entitled had they been compelled to pay the calls, and they
were therefore discharged from their liability as sureties under the guarantee.

(e) If the creditor expressly or impliedly discharge the debtor.

(f) If the creditor discharges a co-guarantor or does any act whereby the right of contribution between
the co-guarantors is destroyed or prejudiced. The discharge of one guarantor from whom his co-
guarantors could have obtained contribution is a discharge of those co-guarantors.

(g) If the guarantee is revoked.

6.4.7 Bailment

(a) Definition

Sir William Jones has given the following definition of bailment:

"A delivery of goods upon trust on a contract, express or implied, that the trust shall be duly
executed, and the goods re-delivered as soon as the time or use for which they were bailed shall have
elapsed or been performed".

It must, however, be borne in mind that although for the most part a bailment does arise under a
contract, express or implied, there are cases of bailment arising without any agreement between the
parties. Thus there is the case of involuntary bailment e.g. where unknown to X, A slips into X's
pocket a packet of diamonds which belongs to B. X, upon discovering this, has a certain duty of care
imposed upon him by the law. He is not entitled to damage or dispose of the diamonds, otherwise he
will be liable to pay damages. It cannot be contended that the bailment which was thrust on X
without his knowledge arose from any agreement, express or implied, as the above definition would
suggest.

The owner of the goods bailed is called the "bailor" and the party to whom they are entrusted is
known as "bailee".

Bailment involves goods. It has no application to land.

(b) Classification or Types of Bailment

Bailments may be divided into the following:

(i) Exclusively for the benefit of the bailor

(a) Depositum (gratuitous deposit).

(b) Mandatum (goods entrusted to another to work upon without payment).
 (ii) For the Exclusive Benefit of the Bailee

Commodatum (a gratuitous loan).

(iii) For the Benefit of both Bailor and Bailee

(i) Locatio (the hire of a thing for payment).

(ii) Vadium (pledge).
(iii) Locatio operis faciendi (goods entrusted to another to work upon for payment).
(iv) Contract of carriage of goods.

(c) Constitution of bailment

There are two essentials for the constitution of bailment of goods.

1. Change in Possession of the Goods

This change of possession can occur in three ways:

(a) Where there is a delivery of the goods themselves to the bailee for the purpose of giving him
exclusive control. The delivery need not necessarily be made by the bailor in person. It may
be effected by his agent.

(b) By taking of the goods with the owner's consent e.g. a waiter in a restaurant takes the hat and
coat which the customer has laid upon a chair.

(c) By a change in the character of the possession. The following are examples:

(i) A, the owner, who has possession, agrees that he will hold his goods as bailee for X.
Or A, a bailee for X, agrees with X's consent that he will hold as bailee for Y. In both
cases the transaction is known as bailment by attornment.

(ii) A has lent his book to X to read, and later A tells X that he can keep the book as a gift.
S's possession is changed from that of bailee for A to that of owner in his own right.

2. Assent of the bailee to receive possession

It makes no difference that the bailee has no intention of acting honestly in respect of the
goods. He none the less can become bailee.

Folkes v King (1923): Folkes owned a motor car which he delivered to a mercantile agent
with instructions to sell it for not less than £575. The mercantile agent sold the car to King for
£340 and misappropriated the money. King bought in good faith and without any notice of the
fraud. Folkes sued to recover the car from King. The Court held that King's title was good
because the car was in the possession of the mercantile agent with Folkes' consent for the
purpose of sale.

There is, however, the case of the involuntary bailee where his consent to receive the goods is
lacking. The law treats the involuntary bailee as if he were a finder of goods. He is not liable
for conversion in tort if he hands the goods to one who wrongfully pretends to be the owner,
provided that he has not been guilty of negligence. But should the involuntary bailee meddle
with the goods he will be liable for damage caused through his negligence.

In Newman v Bourne and Holligsworth Limited: Here it was decided that where a shop-
assistant had found a jewel which had been dropped by the plaintiff in the shop his employers
(the defendants) were liable for damage caused to the jewel by their shop-assistant.
(d) Duties of the Bailee of Goods

There are three situations to consider; where the bailment is for the:

(i) Sole Benefit of the Bailor

(1) As there is no consideration afforded by the bailor if follows that the bailee
cannot be compelled to do anything at all. In other words he is not liable for
non-feasance Elsee v Gatward (1793).

(2) However, if the bailee does enter upon the bailment, the mere fact of accepting
the goods acts as a consideration. The consideration is really the fact that the
bailor has parted with the possession.

(3) The bailee is liable for loss arising from gross negligence.

In Coggs v Bernard (1703): The defendant promised to take up some casks of brandy
and to lay them down in another cellar, without payment. Owing to the negligence of
the defendant one of the casks was staved in and the brandy wasted. It was held that
the defendant was liable inspite of the fact that he was acting gratuitously.

(ii) Benefit of Both Parties

(1) Locatio Rei (Hire for Payment)

The bailee must display ordinary care, and is liable for his negligence. He must
pay the hire price and must use the chattel only for the purpose for which it was
bailed for him.

(2) Vadium (Pawn or Pledge)

(i) Here also the pledgee must display ordinary care. To constitute a valid
pledge there must be actual or constructive delivery of chattel. The
pledgor remains still liable to repay the loan with interest should the
chattel become lost or damaged through no fault of the pledgee, e.g.
where it is stolen. But the onus is upon the pledgee to prove that there
was no negligence on his part.

(ii) The pledgee must not use the chattel without consent of the pledgor,
unless the chattel is of such nature that the pledgee is put to expense in
keeping it e.g. a horse.

(iii) The remedy of the pawnee to recover his money is to sell the chattel if
there has been no repayment of the loan at the agreed date; if there was
no agreed date, then after reasonable notice has been given to the
pledgor that he should pay and redeem. In addition to the remedy of
sale, the pledgee can, of course, sue the pledgor for the amount of the
loan plus interest thereon.

(iv) The pledgee may alienate his own interest in the pledge, or he may
effect a sub-pledge.

The pledgor is always entitled to have his goods back upon repayment of the loan and
interest. Goods pledged may be seized by the pledgee's execution creditors, but only
to the amount of the debt and interest due thereon.
 (3) Location Operis Faciendi (Goods being worked on by Another for Payment)

Here the bailee is only liable for ordinary care.

But where goods are delivered to those who exercise a public calling e.g. a common
carrier or inkeeper, the Common Law imposes a strict liability.

3. Sole Benefit of the bailee

(a) The bailee will be responsible for the loss or damage to the goods bailed due to
negligence. But he will not be responsible for inevitable accident, or theft of goods,
unless due to his own default. In cases of theft is the rule in all classes of bailment that
the onus is upon the bailee to prove care. It is not upon the bailor to show negligence.

(b) The bailee may only use the chattel bailed for the purpose for which it was lent. He
must not lend it to another, not even to his own servant.

He must return the chattel bailed at the proper time in as good a condition of repair as
when he received it, "fair wear and tear excepted".

(c) A loss caused by an act not authorised by the terms of the bailment (even though not a
negligent act) will fall on the bailee.

Lilley v Doubleday: here the bailee was instructed to keep the goods in a particular
warehouse. He removed them to another warehouse as he thought they would be safer
there. A fire occurred in this warehouse and he was held liable.

(d) It is possible, by the express terms of the contract, for the bailee to be relieved from
liability for negligence.

Where a bailee accepts goods and by notice as to conditions he excludes his liability
for damage or loss "however caused", this will relieve him for responsibility arising
through the negligence of his servants. (Travers v Cooper.)

(e) It is the duty of every gratuitous bailee to take care of the goods in his charge and the
burden of proof lies on the bailee to show that he was not negligent.

In Houghland v R.R. Low (Luxury Coaches) Limited (1962):

Houghland, a passenger on a coach belonging to Low, handed her suitcase to the driver, who
placed it in the luggage boot. After a journey involving a breakdown and transfer of the
passengers and luggage to another coach, Houghland arrived at her destination to find that her
suitcase could not be found. Low was found liable, because he had to show that he was not
negligent, and he failed to do so.

4. Exemption Clauses

A special contract may be made between the parties exempting the bailee from liability for
negligence.

Rutter v Palmer (1922): A motor car was deposited at a garage for sale on commission. The
contract contained the clause "Customer's cars are driven by our staff at customer's sole risk".
The car was damaged owing to the negligence of a garage driver. It was held that the garage
was protected from liability by the clause in the contract.
 (h) Title of Bailor

It is a general rule that the bailee is estopped from denying the title of his bailor. He must
return the goods to the bailor on termination of the bailment.

It is the duty of the bailee to inform his bailor should third parties make claim to the goods.

Although the bailee can never claim title to the goods himself as against the bailor, if sued by
the bailor, he can plead in defence that he had been ousted by title paramount. But he cannot
plead this if he accepted the goods with notice of the adverse claim.

(j) Termination of Bailment

This will arise either by re-delivery of the chattel bailed to the bailor or at his direction; or by
the bailee doing an act inconsistent with the terms of the bailment. Thus where goods are let
on hire and the bailee sells them, although the purchaser acquires no title thereto, the bailment
is ended.

Where a bailee accepts goods in the course of his business for repair etc, on the terms that
they shall be redelivered to the bailor when the work has been done, and the bailor fails to pay
the bailee's charges and take delivery, the bailee may sell the goods after an interval of twelve
months and after compliance with the requirements of the Act. The bailee can retain his
charges out of the proceeds of sale and the balance is payable to the bailor (Disposal of
Uncollected Goods Act 1987).

6.4.8 PAWN OR PLEDGE

A pawn—also called a pledge—is the delivery of goods by a debtor to his creditor as security for the debt.

The creditor acquires possession of the goods while the debtor remains with ownership.

6.4.9 LIEN

This is a right conferred upon a person by law in certain circumstances as a security for the fulfilment of an
obligation owed by another.

There are three kinds of lien:

(a) Possessory lien;

(b) equitable lien;
(c) maritime lien

(i) Possessory Lien: This is the right of a party in possession of anothers goods to retain the m as
security for an obligation owned in the owner. The lien exists at common law. (It has been codified
by the Sales of Goods Act in relation to contracts of sale of goods.)

Here, possession is essential, and in order to create the lien the possession must be lawful,
continuous, and not for a particular purpose. Equally, the lien will be lost if the person entitled to it
parts with possession.

(a) General Lien

A general lien gives the person in possession of goods the right to retain those goods until any
debt due to him by the owner of the goods has been paid—whether the debt is in respect of
those goods or otherwise. Such a lien may be enjoyed by express or implied term of the
contract, or from general custom or usage. For example, advocates, bankers, factors,
stockbrokers and auctioneers have a general lien.
 (b) Particular Lien

A particular lien gives the person in possession of goods the right to retain the goods against
the owner only in respect of a debt due to the latter in connection with those particular
goods. Such a lien may arise under the contract, whether express or implied, or may be given
by the Common Law. Examples are carriers (for the freight due on the goods carried), garages
(for their bill of repairs) and the unpaid seller (for the price of the goods sold).

An inkeeper has a possessory lien over the goods of a guest on his premises; such a lien is in
the nature of a particular lien since it can be exercised only re monies due in respect of the
particular visit—but it really stands in a special class since the inkeepers claim does not
essentially relate to the goods.

The right of lien is not affected by the rights of third parties of which the person exercising the
right of lien is ignorant:

Albermarle Supply Company v Hind and Company Garage proprietors executed repairs
from time to time on three taxi-cabs which were kept at their garage for a person who held
them under hire-purchase agreements. The agreements prohibited the hirer from creating any
lien upon the cabs for any money due in respect of repairs. The garage proprietors, in
ignorance of this provision, executed certain repairs to the cab. It was held that despite the
terms of the hire purchase agreement, prohibiting the hirer from creating any lien on the cabs,
a lien attached to the cabs in favour of the garage proprietors for such repairs as they had
executed.

Where no lien exists by Common Law or by express contract, it may be implied either from
previous dealings or from a general and well-recognised trade usage.

(ii) Equitable lien

An equitable is a right in equity to have certain property applied in a particular way. It

attaches independently of the possession of the property and is enforced by applying to the
Court for an order for sale.

Common examples are the lien of an unpaid seller of land who has moved out of
possession for unpaid purchase money, and the right of partners on dissolution to have
partnership property applied in payment of the firm's liabilities and any balance divided in
profit sharing ratio.

(iii) Maritime Lien

A maritime lien is a right under maritime law to have a ship or its cargo sold and the proceeds
applied in satisfaction of any debt due to the person having the lien. As with equitable lien,
such lien is not dependent on possession, and is enforced by application to the High Court
for an order for sale.

Such maritime liens may arise from salvage or from claims regarding damage of collision.
Also, the master and crew of the ship enjoy such a lien in respect of unpaid wages.

6.4.10 LETTER OF HYPOTHECATION

A letter of hypothecation is a document given by a debtor to a creditor as security for a loan.

It is a means of "mortgaging" goods in such a way that neither possession nor ownership thereof is
transferred to the creditor. The borrower retains possession and ownership of the goods but gives the creditor
a right to in rem over the goods which entitles him to deal with them in the manner specified in the letter in
the event of the borrower failing to repay the loan as agreed. The right usually conferred on the creditor is
the right to confiscate and sell the goods.

S.13 of the Chattels Transfer Act provides that a letter of hypothecation must be attested after being signed
by the borrower. However, it was held in Dodhia v National Grindlays Bank that an unattested letter of
hypothecation is:

(a) valid inter partes;

(b) void vis-a-vis third parties.
REINFORCING QUESTIONS
1. (a) Explain the meaning of "negotiability" in relation to bills of exchange.

(b) John purchased a typewriter from Keith and paid the purchase price of £250 by cheque. After he had
used the typewriter for a short time, John concluded that he would have found a word processor more
suited to his needs. Accordingly, he telephoned his bank, Bank Limited, and instructed it not to pay
the cheque. The assistant who took the telephone call from John forgot to pass the message to the
bank official responsible for John's account. John followed his telephone instruction with a
confirmatory letter.

John did not inform Keith that he had stopped the cheque. Keith presented the cheque which the
bank, mistakenly, paid. Keith has subsequently spent the £250 on a holiday. What is the nature of the
bank's liability to Keith and John?

2. What is a bill of exchange? In what ways, if at all, do cheques differ from other bills of exchange?

3. Write notes on the following:

(a) A cheque.

(b) Qualified acceptance of a bill of exchange.

(c) Transfer of a bill of exchange.

Check your answers with those given in Lesson 9 of the Study Pack
COMPREHENSIVE ASSIGNMENT No.3

TO BE SUBMITTED AFTER LESSON 6

To be carried out under examination conditions and sent to the Distance Learning Administrator for marking by the
College.

EXAMINATION PAPER. TIME ALLOWED: THREE HOURS. ANSWER ALL QUESTIONS

1. What rules and presumptions do courts apply in trying to ascertain the meaning of the words which
Parliament has used, when interpreting statutes?

2. (a) Describe the rules which govern the acceptance of offers in the law of contract.

(b) Arthur has recently advertised in the local newspapers as follows:

"Lost: pet dog, answers to the name of Towser. £100 reward for safe return. Money deposited with
lawyers as evidence of good faith"

Bertram read the advertisement and decided to search for the dog. After three days searching he
found it. Unknown to him, Arthur had put a second advertisement in the newspaper the day before,
cancelling the offer of the reward. Advise Bertram.

3. What are the differences between limited liability companies and partnerships?

4. (a) Explain the nature of the duties owed by a banker to his customer in relation to cheques.

(b) Nationwide Bank Limited, which had been mandated by Faith Company Limited to pay cheques
when drawn by two directors, paid a cheque drawn by one director only. Advise Faith Company
Limited whether the bank can debit their account.

5. (a) In what circumstances will a guarantor be discharged from his guarantee?

(b) What kinds of lien are there?

In what circumstances, if any, may a right of lien give rise to a right of sale by the person entitled to
the lien?
LAW OF INSURANCE
7.1 THE CONTRACT OF INSURANCE

7.1.1 According to Professor Ivamy, "a contract of insurance in the widest sense of the term may be defined as a
contract whereby one person, called the "Insurer," undertakes, in return for the agreed consideration, called
the "Premium", to pay to another person, called the "Assured", a sum of money, or its equivalent, on the
happening of a specified event". It was judicially defined by Lawrence, J. in LUCENA v CRAUFURD as
"a contract by which the one party in consideration of a price paid to him adequate to the risk becomes
security to the other that he shall not suffer loss, damage, or prejudice by the happening of the perils
specified to certain things which may be exposed to them".

To be an enforceable agreement, a contract of insurance must contain the following essential elements of a
contract:

i offer and acceptance;

ii consideration;
iii legal purpose;
iv competent parties, and
v legal form.

7.1.2 The offer

Since the contract of insurance is constituted by the acceptance of an offer, it is necessary in the first
instance to make certain that an offer has in fact been made which is capable of being accepted.

To constitute an offer capable of being accepted, the following conditions must be fulfilled:

(a) The alleged offer must be intended by the party making it to be an offer. The party who
begins the negotiations does not necessarily make an offer thereby; he may merely indicate his readiness to
consider an offer.

(b) The alleged offer must be complete. It must show with precision the contract into which the party
making it is prepared to enter.

(c) The alleged offer must be communicated to the other party.

In Rose v Medical Invalid Life Assurance Society (1848) the insurers stated in a letter handed to
their own agent the premium at which they were willing to accept the proposal. The agent did not
hand over the letter to the proposed assured. It was held that there was no contract of assurance.

(d) The alleged offer must be in force at the time when the other party purports to accept it.

An offer may be revoked before acceptance; and an offer once refused ceases to be in force and
cannot afterwards be accepted unless it is repeated (see Hyde v Wrench).

7.1.3 Who makes the insurance offer?

The offer to enter into a contract of insurance may, as a general rule, be considered as addressed to the
insurers by the person who is seeking to protect himself by insurance against loss. He may have been invited
by the insurers to put himself into communication with them; but, whether the invitation comes to him from
the insurers direct, or through the medium of an agent, or whether it is given to him personally, or only as a
member of the public through an advertisement, the position remains unchanged, and he must submit his
proposal, which they may accept or decline at their pleasure. The offer therefore proceeds from the
proposed assured when he has filled up the proposal form and forwarded it to the insurers.
 The terms of an ordinary contract of insurance are not specially arranged between the parties; the insurers
have their own terms upon which they are prepared to contract and from which, as a rule, they are not
willing to depart. There is no real negotiation between the parties, the assured being compelled to contract
with the insurers upon their own terms. There is, therefore, no difficulty, in an ordinary case, in ascertaining
from whom the offer proceeds.

7.1.4 The proposal form

Proposal forms vary in their content according to the nature of the proposed insurance and also according to
the practice of different insurers. All proposal forms, however, contain questions which the
proposed assured is required to answer, and these questions, whatever the nature of the
insurance, are framed on the same general lines.

The matters to which the questions relate may be classified as follows:

i. The description of the proposed assured.
ii. The description of the risk proposed to be insured.
iii. The description of circumstances affecting the risk.
iv. The previous history of the proposed assured.

7.1.5 Acceptance

A proposal is not necessarily accepted at once, since the insurance company may take time to consider it. If
the proposal is submitted through an agent, the agent usually has no authority to accept it himself, but must
forward it to the insurers in order that they may decide whether to accept it or not. There is therefore as a
rule an interval of time between the making of the proposal and the final decision.

7.1.6 "Cover notes”

In the case of some types of insurance, especially motor, burglary and fire insurance, it is the practice of
insurance companies to issue a "cover note" to the proposer pending the issue of the policy.

The cover note "is issued at once on receipt of a proposal and covers the assured and puts the underwriters
on risk for the period while the proposal is being considered and until a policy is either granted or refused"
(per Pearson, J): Julien Praet v H.G. Poland Ltd (1960). Cover notes are not issued in cases of life
assurance.

7.1.7 Form of the cover note

The cover note is, in practice, printed in common form; it is usually signed on behalf of the insurance
company by the agent through whom the proposal was submitted, and issued by him to the proposer.

7.1.8 The effect of the cover note

In Mackie v European Assurance Co. Malins, V.C, stated that the cover note is in itself a contract of
insurance, governing the rights and liabilities of the parties in the event of a loss taking place during its
currency. The assured is, therefore, entitled to enforce the contract contained in the cover note, provided that
he has complied with its conditions, e.g. as to payment of the premium. However, if a policy is issued before
the payment of the premium, the issue may amount to a waiver of the condition: Roberts v Security Co.
Ltd

7.1.9 The incorporation of the terms of the policy

The cover note itself may contain no terms at all, but usually it incorporates the conditions of the company's
policy, e.g. as in Queen Insurance Co v PARSONS (1881) where the cover note stated that the proposer
"has proposed to effect an insurance against fire, subject to all the usual terms and conditions of this
 company". Sometimes the cover not incorporates the terms of the policy not by referring to them directly but
by referring to the PROPOSAL FORM which itself alludes to them.

The insurance company may also rely on the terms and conditions of the policy if it can be shown that the
assured KNEW OF THEM, or to have had the opportunity of knowing them, and to have agreed to be bound
by them. For example in GOLDING v ROYAL LONDON AUXILIARY INSURANCE CO (1914) a fire
took place during the currency of the cover note. The claim was referred under the arbitration clause in the
company's ORDINARY FORM OF POLICY and no question was raised as to whether it applied or not.

On the other hand, as against the insurers, the cover note is to be construed with reference to the common
form of policy issued by them, and they cannot rely upon a construction of the cover note inconsistent
therewith: BROWNING v PROVINCIAL INSURANCE CO OF CANADA (1873)

7.1.10 Replacement of the cover note by a policy

The cover note is normally replaced in due course by A POLICY, but the insurance company is NOT
BOUND to issue one, unless there is an agreement to that effect. The assured, too, is not bound to accept the
policy.

In Mackie v European Assurance Society Malins, V-C stated:

"During that month (i.e when the cover note was in force) it was open to the [company] on further inquiry to
REFUSE to grant the policy and to terminate the contract at the end of the month. It was equally open to the
assured to say that he did not like the (company), not thinking the capital sufficient, or for other reasons."

7.1.11 Broker’s cover note

Where the insurance is effected through a broker, the broker, pending the preparation of the policy, issues a
"broker's COVER NOTE", certifying that the insurance has been effected and setting out its terms. By
issuing the cover note, the broker does not incur liability upon the insurance, since he does not purport to be
an insurer. But he is presumed to warrant to the proposer that his instructions have been properly carried out,
and that the insurance has been effected. If, therefore, there is no insurance in fact, he will be liable for
breach of the warranty. Such a cover note is not binding on the insurers.

7.1.12 The acceptance

(i) What constitutes acceptance

There cannot be an acceptance so long as the terms of the contract of insurance are still under
discussion and the premium remains to be fixed, since there is NO CONTRACT until complete
agreement has been reached, and nothing remains to be done by either party except to perform what
has been agreed.

The offer, therefore, must be complete on the face of it, and the acceptance must be in the VERY
TERMS of the offer - in accordance with the rules of the common law relating to offer and
acceptance.

(ii) The methods of acceptance

The methods of accepting the OFFER will depend on whether the offer is made by the proposer as it
normally will be, or whether it is made by the insurer.

Where the offer is made by the proposer, the final acceptance of a proposal may be signified by the
insurers in one or other of the following ways:

(a) By a formal acceptance which is UNCONDITIONAL.

 (b) By the issue of a policy.
(c) By acceptance of the premium.
(d) By the conduct of the insurers.

(a) Issue of policy

The issue of the policy is a conclusive intimation that the insurers have accepted the proposal.

In WRIGHT v SUN MUTUAL LIFE INSURANCE CO. it was explained that, if an insurance
company is by its constitution bound to issue its policies under seal, a policy issued WITHOUT A
SEAL may be effective as a valid contract to issue a policy under seal.

Once the policy is issued, the insurers are bound by their acceptance and will be estopped by the
issue of the policy and the receipt of the premiums from alleging that there was no contract on the
ground that NO PROPOSAL had ever been signed: Pearl Life Assurance Co. v Johnson (1909).

In the case of a policy under seal, the acceptance is completed by the execution of the policy. In
Roberts v Security Co. (1897) Lopes, L.J stated:

"The question we have to consider is whether there was a concluded agreement for insurance, or the
matter had not gone beyond the stage of negotiation. In my opinion the policy, being duly executed
as it was by the SEALING AND SIGNATURE by the directors and secretary of the company,
constituted a concluded agreement ..... in my opinion if the day after its being so executed, the
plaintiff had tendered the premium and demanded the policy, there would have been no answer to the
demand".

It is therefore immaterial that the policy is retained by the insurers in their possession, and never
handed over to the proposer, in as much as no formal acceptance is required from him, nor need
he take away the policy in order to complete the delivery.

The policy, as an enforceable contract of insurance, is complete as from the date of its issue, even
though NO PREMIUM HAS BEEN PAID at the time of the losses in respect of which the proposer
seeks to enforce it.

By the terms of the policy, however, he may be, in some cases, precluded from enforcing it in respect
of any loss happening before he has complied with its conditions, e.g. by paying the premium.

The issue of a policy is not, however an acceptance in the following cases;

(i) Where the assured does not treat the policy as an acceptance, but continues the negotiations
for the purpose of obtaining an alteration in its terms, as occurred in Sickness and Accident
Assurance Association v General Accident Assurance Corporation.

(ii) Where the policy, as issued, departs from the proposal by introducing a fresh term, and thus
constitutes not an acceptance but a counter-offer. This was stated by Lord Loreburn L.C in
Allis-Chalmers Co v Maryland Fidelity and Deposit Co.

The introduction of the fresh term shows that the agreement is not yet complete, since
something remains to be done by the proposer to declare his adoption of it.

(b) Conduct of the insurer

 Even where the premium has not been paid, nor the policy issued, the facts may clearly show
that the insurers have accepted the proposal, and that there is a binding contract between the parties, on the
part of the proposer to pay the premium, and on the part of the insurers to issue a policy. Where this is the
case, the insurers cannot refuse to accept the premium when tendered, or otherwise repudiate their contract,
and will be liable for a loss happening even before a policy is issued or the premium is paid.

(c) What facts constitute an acceptance on the part of the insurers will depend upon the
circumstances of the particular case. A mere demand for the premium is sufficient. But mere delay in
dealing with an application for insurance does not constitute an acceptance, unless it is the duty of the
insurers to intimate their rejection promptly.

(d) Acceptance and retention of the premium

Where no policy has been issued to the proposer before the loss, the receipt of the premium and its
retention by the insurers, though by no means conclusive, may raise the presumption, in the absence
of any circumstances leading to a contrary conclusion, that the insurers have definitely accepted his
proposal. In such a case they are not entitled to refuse to issue a policy to him, and they are, therefore,
liable to him in the event of a loss.

7.1.13 The effect of the acceptance

On the final acceptance of the proposal the negotiations come to an end and the duty of disclosure ceases.
The assured, therefore, is under no obligation either to disclose any material facts which only come to his
knowledge or to correct any misrepresentation the inaccuracy in which is only discovered after acceptance.

An acceptance once given binds the parties and cannot be withdrawn except by mutual consent. It is
immaterial that the parties have misapprehended their position and have cancelled the policy on the
assumption that no contract exists between them.

7.1.14 Non-disclosure (Utmost good faith) Uberrima Fides

It is a fundamental principle of insurance law that the utmost good faith must be observed by each party.
This rule was stated by Lord Mansfield in CARTER v BOEHM (1766) as follows:

"Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be
computed, lie more commonly in the knowledge of the insured only: the underwriter trusts to his
representation, and proceeds upon confidence that he does not keep back any circumstance in his
knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him
to estimate the risk as if it did not exist. The keeping back such circumstance is a fraud, and therefore
the policy is void. Although the suppression should happen through mistake without any fraudulent intent,
yet still the underwriter is deceived, and the policy is void; because the risk run is really different from
the risk understood and intended to be run at the time of the agreement..... the governing principle is
applicable to all contracts and dealings. Good faith forbids either party by concealing what he privately
knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary....."

The case of CARTER v BOEHM concerned a policy which had been taken out against the taking of a fort
by a foreign enemy but the principle of law stated therein by Lord Mansfield was applied by Jessel, M.R to
LONDON ASSURANCE v MANSEL 1879, which was a case concerning life assurance in which he
stated:

"As regards the general principle I am not prepared to lay down the law as making any difference in
substance between one contract of assurance and another. Whether it is life, or fire, or marine assurance,
I take it good faith is required in all cases, and though there may be certain circumstances from the
peculiar nature of marine insurance which require to be disclosed, and which do not apply to other contracts
of insurance, that is rather, in my opinion, an illustration of the application of the principle than a distinction
in principle".

In ROZANES v BOWEN (1928) the court stated:

 "It has been for centuries in England the law in connection with insurance of all sorts, marine, fire, life,
guarantee and every kind of policy, that, as the underwriter knows nothing and the man who comes to
him to ask him to insure knows everything, it is the duty of the assured, the man who desires to have a
policy, to make a full disclosure to the underwriters WITHOUT BEING ASKED OF ALL THE
MATERIAL CIRCUMSTANCES, because the underwriter knows nothing and the assured knows
everything. That is expressed by saying that it is a contract of the utmost good faith - UBERRIMA
FIDES".

In JOEL v LAW UNION AND CROWN INSURANCE CO.(1908) Fletcher-Moulton stated that the
purpose of the uberrima fides rule is to impose on the parties to an insurance contract the duty to help
each other to come to a right conclusion. The parties are not allowed to hold each other at arm's length in
defence of what they might perceive to be their conflicting interests. Consequently, it is the duty of the
assured not only to be honest and straightforward but also to make a FULL DISCLOSURE OF ALL
MATERIAL FACTS. All statements made by him during the negotiations must also be accurate.

Similarly, it is the duty of the insurers and their agents to disclose ALL MATERIAL FACTS WITHIN
THEIR KNOWLEDGE. In particular, all representations made by them during the negotiations with a view
of inducing the assured to accept a policy must be true.

In CARTER v BOEHM (1766) Lord Mansfield stated (obiter) that "the policy would be equally void,
against the underwriter, if he concealed; as, if he insured a ship on her voyage which he privately knew to
be arrived; and an action would lie to recover the premium".

In RE: BRADLEY AND ESSEX AND SUFFOLK ACCIDENT INDEMNITY SOCIETY (1912)
Farwell, L.J. stated:

"Contracts of insurance are contracts in which uberrima fides is required, not only from the assured, but
also from the company assuring".

7.1.15 Non- disclosure

The assured is under a duty to disclose all material facts relating to the insurance which he proposes to
effect. In addition he must make no misrepresentation regarding such facts.

1. The extent of the assured’s duty

The assured must disclose all material facts which are within his actual or presumed knowledge.

(a) Actual Knowledge

The special facts distinguishing any proposed insurance are, as a general rule, unknown to the
insurers who are not in a position to ascertain them. They lie, for the most part, solely within
the knowledge of the proposed assured. Good faith, therefore requires that he should not, by
his SILENCE, mislead the insurers into believing that the risk, as proposed, differs, to their
detriment, from the risk which they will actually run. On the contrary, he should help them
by every means in his power to estimate the risk at its proper value: JOEL v LAW UNION
AND CROWN INSURANCE CO. (Per Fletcher-Moulton L.J)

A failure on the part of the assured to disclose a material fact is sometimes called
"concealment". Strictly speaking, however, the word implies the keeping back or
suppression of something which it is the duty of the assured to bring specifically to the
notice of the insurers, and not merely an inadvertent omission to disclose it. Hence, where
the failure to disclose is not due to DESIGN and the assured has no intention to deal otherwise
 than frankly and fairly with the insurers, the term 'NON-DISCLOSURE" may perhaps be
more appropriate.

Every contract of insurance proceeds on the basis that the duty of disclosure has been
discharged by the proposed assured, and the failure to discharge it renders the contract
VOIDABLE at the instance of the insurer.

(b) Presumed knowledge

The duty of making disclosure is not confined to such facts as are within the actual knowledge
of the assured. It extends to all material facts which he ought in the ordinary course of
business to HAVE KNOWN, and he cannot escape the consequences of not disclosing them
on the ground that he did not know them. This was stated by Cockburn, L.J in
PROUDFOOT v MONTEFIORE (1867).

There is, however, no duty to disclose FACTS which the assured DID NOT KNOW, and
which he could not be reasonably expected to know at any material time.

In JOEL v LAW UNION AND CROWN INSURANCE CO. Fletcher-Moulton, L.J stated:

"But the question always is: Was the knowledge you possess such that you ought to have
disclosed it? Let me take an example. I will suppose that a man, as is the case with most of
us, occasionally had a headache. It may be that a particular one of these headaches would
have told a brain specialist of hidden mischief. But to the man it was an ordinary headache
undistinguishable from the rest. Now, no reasonable man would deem it material to tell an
insurance company of all the casual headaches he had had in his life, and, if he knew no more
as to this particular headache than that it was an ordinary casual headache, there would be no
breach of his duty towards the insurance company in not disclosing it. He possessed no
knowledge that it was incumbent on him to disclose, because HE KNEW OF NOTHING
WHICH A REASONABLE MAN WOULD DEEM MATERIAL, or of a character to
influence the insurers in their action. It was what he did not know which would have been of
that character, but he cannot be held liable for non-disclosure in respect of facts WHICH HE
DID NOT KNOW"

In BLACKBURN, LOW AND CO. v VIGORS (1887) Lord Halsbury stated that, where a
fact could have been discovered by the assured if he had made reasonable enquiries, he is
guilty of a breach of duty towards the insurers who would be entitled to avoid the policy.
This is so because his ignorance was due to his intentional failure to make such enquiries as
he might reasonably have been expected to make in the circumstances.

Where the assured's failure to make is unintentional, the policy is equally liable to be
avoided on the ground that it is inconsistent with his duty towards the insurers to have
neglected to make them. Whether he had failed in his duty will in each case depend on the
circumstances of the case.

Agent’s knowledge imputed to principal

If the proposed assured employs an agent to represent him during the negotiations leading up to the
policy, it is the duty of the agent to disclose to the insurers all material facts which are within his
knowledge, however acquired, or which ought to have come to his knowledge in the ordinary course
of business.

The Marine Insurance Act (Cap 390) s.19..... provides that:

"....Where an insurance is effected for the assured by an agent, the agent must disclose to the insurer -
 Every material circumstance which is known to himself, and an agent to insure is deemed to know
every circumstance which in the ordinary course of business ought to be known, or to have been
communicated to him..."

Any failure to discharge this duty, whether by non-disclosure or by misrepresentation, entitles the
insurer to avoid the policy as against the proposed assured, since he has delegated the duty of
disclosure to his agent and is responsible for the manner in which it is performed. *In
BLACKBURN LOW & CO v VIGORS* Lord Macnaghten expressed the view in a case of marine
insurance, that concealment by an agent is not a case of knowledge imputed to the principal but is a
direct breach of duty on the part of the agent who is, equally with the principal, bound to disclose all
material facts within his knowledge.

It is, therefore, immaterial whether the agent was guilty of an intentional concealment or of fraud or
whether he did not disclose a particular fact because he honestly thought it was not material, as in
KRANTZ v ALLAN (1921), where the agent made a bona fide mistake in a burglary insurance.

It is equally immaterial whether the proposed assured expressly instructed the agent to disclose the
fact in question or whether he gave the agent general instructions to disclose all material facts and
keep nothing back, or whether he simply left everything to the agent and did not know that he had
not performed his duty, as illustrated by RUSSELL v THORNTON where the assured sent a copy
of a letter which he received during the negotiations, and which contained material facts to the agent,
who did not communicate it to the insurers.

It is the duty of the proposed assured, since he appoints the agent to represent him in the negotiations
and to perform the duty of disclosure on his behalf, to place the agent in possession of all the material
facts which the proposed assured would have been bound to disclose to the insurers, if he himself had
been conducting the negotiations. In VALLANCE v DEWAR (1808), Lord Ellenborough, C.J
stated, in a marine insurance case:

"The rule is that the broker must communicate what is in the special knowledge of the assured".

An omission or misstatement on the part of the agent which, if judged solely from the agent's state
of knowledge, would have NO EFFECT ON THE VALIDITY OF THE POLICY may, when the
proposed assured's knowledge is imputed to the agent, amount to non-disclosure (as in Webster v
Foster where the insurers asked questions which the agent was unable to answer) or
misrepresentation (as in BUFE v TURNER where the assured, immediately after a fire on adjacent
premises had been apparently extinguished sent instructions by an extraordinary conveyance to his
AGENT to effect an insurance, but omitted to mention the fire, which broke out again and destroyed
the assured's premises). In such a case, the insurer is entitled to avoid the policy. It is immaterial
whether the proposed assured neglected to communicate his knowledge to the agent because he did
not think the knowledge material, or whether he designedly employed an agent who was ignorant
of the truth.

7.1.16 What are “Material Facts?”

The English courts developed various tests which have been adopted by Kenya courts in order to ascertain
what facts are to be regarded as material.

The test which is usually applied is whether the non-disclosure of the facts would influence a "prudent"
insurer, (though in some cases the term "reasonable" has been substituted for "prudent"). Another test is
whether a "reasonable" assured would consider them material.

In no case is it relevant to consider whether the non-disclosure would influence the particular insurer
concerned or whether the assured himself thought that the facts were material. In JOEL v LAW UNION
AND CROWN INSURANCE CO. Fletcher-Moulton, L.J. stated:

"The disclosure must be of all you ought to have realised to be material, not of that only which you DID
IN FACT realise to be so..... Your opinion of the materiality of that knowledge is of no moment. If a
 reasonable man would have recognised that it was material to disclose the knowledge in question, it is no
excuse that you did not recognize it to be so".

7.1.17 "Prudent Insurer Test”

As far as marine insurance is concerned, s.18(2) of the Marine Insurance Act (Cap 390) provides that:

"A circumstance is material if it would influence the judgement of a prudent insurer in fixing the premium,
or determining whether he will take the risk"

Regarding the meaning of the term "prudent insurer" Atkin, J in Associated Oil Carriers Ltd v Union
Insurance society of Canton Ltd (1972) 2 K.B.184 stated:

".....There seems no reason to impute to the insurer a higher degree of knowledge and foresight than that
reasonably possessed by the more experienced and intelligent insurers carrying on business in that market at
that time".

The only test of materiality of a fact is whether the non-disclosure of the fact would influence a "prudent"
insurer. Whether it would influence the particular insurer concerned is irrelevant.

In Zurich General Accident and Liability Insurance Co. Ltd v Morrison, Mackinnon, L.J. stated:

"What is material is that which would influence the mind of a prudent insurer in deciding whether to
accept the risk or fix the premium, and if this be proved it is not necessary further to prove that the mind
of the actual insurer was so affected. In other words, the assured could not rebut the claim to avoid the
policy because of a material representation by a plea that the particular insurer concerned was so stupid,
ignorant, or reckless, that he could not exercise the judgment of a prudent insurer and was in fact unaffected
by anything the assured had represented or concealed".

It is also the rule that the assured's opinion as to whether the fact NOT DISCLOSED is material is irrelevant.
In LINDENAV v DESBOROUGH (1828) Bayley, J. stated:

"The proper question is `whether any particular circumstance was in fact material?' and not whether the
party believed it to be so. The contrary doctrine would lead to frequent suppression of information, and it
would often be extremely difficult to show that the party neglecting to give the information thought it
material".

This rule is illustrated by the decision in Godfrey v Britannic Assurance Co. Ltd (1963) in which the
facts, briefly, were as follows. The assured under a life policy had been told that he might have minor kidney
trouble and should take care. Later he was told that the kidney condition was unchanged and that an X-ray
showed lung infection which would probably clear up with treatment. He also suffered from attacks of
pharyngitis. None of these facts was disclosed to the insurance company when the proposal was signed,
because the proposed assured did not deem it necessary to tell the insurers about them.

It was held that these facts were material facts, and the company could avoid liability under the policy,
because the assured as a reasonable man without any specialist knowledge, should have appreciated that
he possessed knowledge of his health WHICH WAS OF MATERIALITY to the company.

NOTE:

In January 1957 the Law Reform Committee (UK) in their Fifth Report recommended "that for the purpose
of any contract of insurance no fact should be deemed material unless it would be considered material by a
reasonable insured: (parag.14)

They wondered whether the insuring public at large is aware of the legal rule regarding non-disclosure and
the fact that the rule entitles the insurers to REPUDIATE LIABILITY whenever they can show that a fact
within the knowledge of the insured was not disclosed by him.
 They noted that "a fact may be material to insurers, in the light of the great volume of experience of claims
available to them, which would not appear to a proposer for insurance, however honest and careful, to be
one which he ought to disclose."

7.1.18 Materiality is a question of fact

Whether a particular fact is material depends upon the particular circumstances of the particular case. It does
not necessarily follow that because a fact has been held to be IMMATERIAL in one case, a similar fact is
not material in another. At the same time, similar circumstances may be assumed to be equally material or
immaterial, whatever the nature of the insurance. The question is one of fact to be decided, if necessary, by
the judge hearing the case after receiving relevant evidence. (See Marine Insurance Act s.18(4)).

Time of materiality

The materiality of a fact is determined by reference to the date at which it should, if at all, have been
communicated to the insurers.

If at that date the fact was material its non-disclosure is a ground for avoiding the contract, notwithstanding
that it afterwards turns out to be immaterial, or indeed untrue.

On the other hand, the non-disclosure of a fact which was not at that date material, and which was, therefore,
not a fact to which the duty of disclosure then attached, does not affect the validity of the policy, even
though the fact afterwards becomes material and actually brings about the loss: WATSON v
MAINWARING (1813) in which the proposed assured was suffering and ultimately died of a disease
which was not generally a "disorder tending to shorten life" within the meaning of the proposal.

Matters which need not be disclosed

Facts which would, in ordinary circumstances, be material, may become immaterial in the special
circumstances of the case; and the assured is then under no obligation to disclose them. Facts which may
thus become immaterial may be grouped under the following classes:

(a) Facts which are known to the insurers or which they may reasonably be presumed to know.
(b) Facts which they could have discovered by making enquiry.
(c) Facts as to which they waive information.
(d) Facts tending to lessen the risk.
(e) Facts the disclosure of which is unnecessary by reason of a condition. (See the Marine Insurance
Act, s.18(3).
(f) Provisions or propositions of law.
(g) Unknown facts.
(h) Matters of public notoriety.

7.1.19 The duration of the duty of disclosure

The duty of disclosure continues throughout the negotiations and until at least the contract has been
completed by acceptance: RE YAGER AND GUARDIAN ASSURANCE CO. LTD Channell J. stated:

"The time up to which it must be disclosed is the time when the contract is concluded. Any material fact that
comes to his knowledge before the contract must be disclosed".

In WHITWELL v AUTOCAR FIRE AND ACCIDENT INSURANCE CO. LTD (1927) - In a proposal
form for motor-insurance there was a question which asked the proposer whether any insurance company
had DECLINED his insurance. He gave the answer "NO". This was in fact a true statement at the time at
 which he made it. But in fact, quite unknown to him, two days before the proposal was accepted another
insurance company had declined to insure him. It was held that there was no duty to disclose this fact
AFTERWARDS because the contract was concluded when the proposal was accepted.

7.1.20 The effect of non-disclosure

In CARTER v BOEHM which was a case involving marine insurance it was held that a failure on the part
of the assured to disclose a material fact within his actual or imputed knowledge renders the policy
VOIDABLE at the option of the insurers. This is so whether the failure to disclose is attributable to fraud, or
carelessness, inadvertence, indifference, or mistake, error of judgement, or even to his failure to realise that
the fact is material. Ignorance of a fact which he ought to have known and, hence, disclosed, will also render
the policy voidable at the option of the insurers.

As far as marine insurance is concerned s.18(1) of the Marine Insurance Act (Cap.390) states:

"Subject to this section, the assured must disclose to the insurer, before the contract is concluded, every
material circumstance which is known to the assured, and the assured is deemed to know every circumstance
which, in the ordinary course of business, ought to be known by him; and, if the assured fails to make such
disclosure, the insurer may avoid the contract".

7.1.21 Misrepresentation

A representation is a statement of fact made by one party to the contract (the representor) to the other (the
representee) which, while not forming a term of the contract, is yet one of the reasons that induces the
representee to enter into the contract. A misrepresentation is a representation that is UNTRUE.

A statement of belief or opinion as to a particular fact is not a representation. At common law, a

misrepresentation may be :

(i) fraudulent—if it was made knowingly, recklessly or without belief in its truth; or

(ii) innocent—if the maker honestly believed it to be true.

A misrepresentation, whether fraudulent or innocent, renders a contract VOIDABLE at the option of

the person to whom the misrepresentation was made: Derry v Peek. This applies equally to
insurance in cases where representations have been made by one of the parties during the
negotiations with a view of inducing the other party to enter into the contract.

7.1.22 Questions and Answers

The insurers may, at any time during the negotiations, ask the assured questions as to any matters upon
which they require information. In practice, a list of printed questions in the proposal form is usually
submitted to him to answer in writing. In addition, he may be asked other questions on specific matters not
covered by the questions in the proposal form. Such questions may be put and answered in writing or
verbally - as in Joel v Law Union and Crown Insurance where answers to questions put by the medical
examiner were written down by him, and signed by the proposed assured.

7.1.23 The effect of the questions

In DAWSONS LTD v BONNIN (1922) 2 A.C.413 it was stated that, notwithstanding the questions that the
insurers ask, the Common Law duty of disclosure remains on the PROPOSER and he must disclose
material facts which are not covered by the questions. However, Scrutton, L.J. observed in
NEWSHOLME BROTHERS v ROAD TRANSPORT AND GENERAL INSURANCE CO. LTD
(1929) 2 K.B.356 that "the insurance companies also run the risk of the contention that matters they do not
ask questions about are not material, for, if they were, they would ask questions about them".

On the other hand:

 "It is unquestionably plain that questions in a proposal form may be so framed as necessarily to imply that
the underwriter only wants information on certain subject-matters, or that within a particular subject-matter
their desire for information is restricted within the narrow limits indicated by the terms of the question, and,
in such a case, they may pro tanto dispense the proposer from what otherwise AT COMMON LAW would
have been a duty to disclose everything material" (per Asquith, L.J. in SCHOOLMAN v HALL, (1951) 1
Lloyd's Rep.139,C.A). An example of this effect of the questions is to be found in JESTER-BARNES v
LICENCES AND GENERAL INSURANCE CO. LTD (1934), 49LI.L. Rep.231, where Mackinnon, J.
stated (obiter) that if an insurance company had asked a proposer the question "Have you or your driver
during the past five years been convicted of any offence?" and he had said "NO", and that was true, he
would have come without any hesitation to the conclusion that the company was not entitled after asking
that question and receiving the true answer, to take it to mean that he had failed to disclose that he had been
convicted eight years ago, and that that was a material fact.

7.1.24 The effect of the answers

The effect of the proposer's answers will depend upon whether there is or is not a "basis" clause in the
proposal form.

Where there is a "basis" clause

The result of the presence of a "basis" clause in a proposal form is to render irrelevant any question either of
the materiality of the information given therein, or the honesty or care with which it is given. If the
answer given is inaccurate, the insurers are at liberty to repudiate the policy. In addition, the proposer
remains under the common law duty to disclose material facts which are not specifically covered by
the proposal form.

The effect of a basis clause is illustrated by DAWSONS LTD v BONNIN (1922).

7.1.25 Where there is no "Basis” clause

Where there is no condition making the proposal the "basis" of the contract, the inaccuracy of the answers
does not entitle the insurers to repudiate liability unless it amounts to the NON-DISCLOSURE OR
MISREPRESENTATION of a material fact. A fraudulent representation relating to a material fact avoids
the contract. If the fact is not material, the validity of the contract is not affected.

As far as marine insurance is concerned, the insurer is entitled to avoid liability on the policy, whether the
misrepresentation is FRAUDULENT or innocent. Section 20 (1) of the Marine Insurance Act (Cap 390)
states:

"Every material representation made by the assured or his agent to the insurer during the negotiations for a
contract of marine insurance, and before the contract is concluded, must be true; and if any such
representation is untrue the insurer may AVOID THE CONTRACT".

7.1.26 Insurable interest

Another fundamental principle of insurance law is the concept of "insurable interest". The general rule is
that a policy of insurance would be void as constituting a wager if the proposer had no insurable interest in
the life or property insured.

Definition

In Lucena v Craufurd (1806) (House of Lords), Lawrence J. stated:

"A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances
which may attend it... and whom it importeth that its condition as to safety or other quality should continue...
 having some relation to, or concern in the subject of the insurance, which relation or concern by the
happening of the perils insured against may be so affected as to produce a damage, detriment or prejudice
to the person insuring; and where a man is so circumstanced with respect to matters exposed to certain risks
or damages, or to have a moral certainty of advantage or benefit, but for those risks or dangers, he may be
said to be interested in the safety of the thing".

This definition forms the basis of s.5(2) of the Marine Insurance Act (Cap.390) which provides:

"In particular, a person is interested in a marine adventure where, he stands in any legal or equitable relation
to the adventure or to any insurable property at risk therein, in consequence of which he may
benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or
by damage thereto, or by the detention thereof, or may incur liability in respect thereof"

(a) A direct relationship between the insured and the subject matter
(b) The insured is directly responsible for any loss arising
(c) The insured has a legal or equitable interest or right in the subject matter
(d) The insured’s interest in the subject matter is capable of financial or pecutiary estimation or
quantification

7.1.27 Time for insurable interest

The rules relating to insurable interest are as follows:

1. In case of marine insurance, the Marine Insurance Act (Cap.390), s.6(1) provides that:

"The assured must be interested in the subject-matter insured at the time of the loss, though he need
not be interested when the insurance is effected".

2. In the case of life assurance, the interest must exist at the time the policy is effected, and it need not
continue thereafter. The other rules are as follows:

(a) A person has an unlimited interest in his own life.

(b) A man has an unlimited interest in the life of his wife: GRIFFITHS v FLEMING (1909)
IK.80(c)
iii A woman has an unlimited interest in life of her husband: REED v ROYAL EXCHANGE
ASSURANCE CO. (1795), Peake Add. Cas.70.

(d) A lady has an insurable interest in the life of her fiance, for his contract to marry her is
recognized by the common law as having pecuniary value, and the remedy for breach of promise to marry is
in damages. Similarly, a man has an insurable interest in the life of his fiancee.

(e) At common law, a child has no insurable interest in the life of his parent, and vice versa.
Harse v Pearl Life Insurance Co. Ltd.
Question:

Should the Kenya law be changed to allow a parent to have an insurable interest in the life of
his child who supports him - the interest to be insured being limited to the amount which is
necessary to protect the parent against the contingency of the death of the child? That change,
if made, would make Kenya law correspond to the law in Scotland where a parent has a right
to be supported by his child.

(f) A creditor has an insurable interest in the life of the debtor to the extent of the debt: Godsall
v Boldero (1807), 9 East 72. See Dalby's case.

(g) A master has an insurable interest in the life of his servant to the extent of the value of the
services agreed to be rendered: Simcock v Scottish Imperial Insurance Co. (1902) 10
S.L.T.286.
 (h) A servant has an insurable interest in the life of his master to the extent of his remuneration
for the agreed period of service, if the contract of employment is for a fixed duration, or the
agreed period of notice in other cases: Hebdon v West (1863) 3B and S.579. - An employee
who was to be employed for 7 years at a salary of £600 per annum effected a policy on his
employer's life, 2 years after the employment commenced, for £2500. The employer died and
he claimed the sum insured. It was held that he had an insurable interest in the employer's life
to the extent of the value of the salary for the REMAINING TERM OF EMPLOYMENT.

7.1.28 Subrogation

Where one person has a claim against another, a third person is, in certain circumstances, allowed to have
the benefit of the claim and the remedy for enforcing it, although it has not been assigned to him, and he
is then said to be subrogated to the rights of the first person (14 Halsbury's Laws (3rd Ed.)618).

Where the insurer pays for a total loss, either of the whole, or in the case of goods of any proportionate part,
of the subject matter insured, he thereupon becomes entitled to take over the interest of the assured in
whatever may remain of the subject matter so paid for, and he is thereby subrogated to all the rights and
remedies of the assured in and in respect of that subject matter as from the time of the casualty causing the
loss. Subject to the foregoing, where the insurer pays for a partial loss, he acquires no title to the subject
matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of
the assured in and in respect of the subject matter insured as from the time of the casualty causing the loss, in
so far as the assured has been indemnified by the insurer for the loss. (22 Halsbury's Laws (3rd Ed.) 160).

In Castellain v Preston Brett, L.J. stated:

"In order to apply the doctrine of subrogation, it seems to me that the full and absolute meaning of the word
must be used, that is to say, the insurer must be placed in the position of the assured. Now it seems to me
that in order to carry out the fundamental rule of insurance law, this doctrine of subrogation must be carried
to the extent which I am now about to endeavour to express, namely, that as between the underwriter and
the assured the underwriter is entitled to the advantage of every right of the assured, whether such
right consists in contract, fulfilled or unfulfilled, or in remedy for tort capable of being insisted on or already
insisted on or in any other right, whether by way of condition or otherwise, legal or equitable, which can be,
or has been exercised or has accrued, and whether such right could or could not be enforced by the insurer
in the name of the assured by the exercise or acquiring of which right or condition the loss against
which the assured is insured, can be, or has been diminished.... But it will be observed that I use the
words `of every right of the assured'".

7.1.29 Indemnity

The concept of indemnity was explained by Brett, J. in Castellain v Preston as follows:

"The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely,
that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of
indemnity alone, and that this contract means that the assured, in case of a loss against which the
policy has been made, shall be fully indemnified, but shall never be more than fully indemnified".
This means that the assured would be compensated for the actual loss he has suffered up to the sum insured.
For example, if Kamau insures his house for one million shillings and it is burnt down, if Shs100,000 will
restore it, then he may claim Shs100,000 and no more. If, due to inflation, it will cost two million shillings to
restore it, then he can only claim one million shillings (the sum insured). He can never recover more than the
sum for which the property is insured.

7.1.30 Double Insurance

"Double insurance" arises where a person effects more than one insurance with different insurers on the
same risk and interest, and the sums assured exceed the value of the property insured.

Examples:
 (i) X insures property worth £10,000 with Co. A for £7,500 and Company B for £5,000. This is double
insurance because the value of the property, £10,000, has been exceeded.

(ii) X insurers the property (above) with Company A for £4,500 and Company B for £5,500. This is not
double insurance because the aggregate sums insured do not exceed £10,000 (the value of the
property insured). The principle of double insurance is intended to safeguard the indemnity principle,
by ensuring that the insured does not recover more money than he has lost by the simple devise of
insuring with different insurers and recovering the insured amount from each one of them.

7.1.31 Contributions and apportionment

Where there is more than one policy enforceable at the time of loss covering the same subject matter, risk
and interest the insured may recover the total loss from either insurer. Any insurer who pays
more than his share may claim a contribution from the others in proportion to the sum insured
with each.

Example:

X insures property worth £10,000 with Company A for £4,500 and Company B for £5,500. The property is
damaged to the extent of £1,000. X can recover the £1,000 from either A or B company, and the other
company would then pay to the company which has compensated X in the ratio 9:11.

Conditions for Contribution

(i) There must be more than one policy on the same subject matter and risk
(ii) All must be taken out by the same person
(iii)

i. All must be legally binding and in force

ii. None of the policies should exempt itself from liability to contribution

7.1.32 Average clause

If the policy contains what is known as the "subject to average clause", the assured can only recover such
proportion of any loss as the amount insured bears to the value of the property insured. This will occur if
property is insured for an amount which is less than its value and the property is partially destroyed.
 Example:

X's building worth £100,000 is insured for £10,000. The building is damaged to the extent of £10,000. If the
policy contains a "subject to average clause, X can only recover £100. The amount payable is calculated on
the basis of:

I.V x Loss 10,000 x 1,000

A.V 10,000

= £100

Note:

I.V = Insured Value

A.V = Actual Value

In such a case, the insurer and the insured are regarded as sharing the loss. If the policy does not contain an
average clause, the insured can recover the whole loss he has suffered up to the extent of the amount insured
(in the above example, £1,000).

The average clause is inserted by insurance companies as a means of compelling the owner of the property
to insure it up to its full value. In that case the premium payable increases and, of course, the insurer's
premium income also increases. It should be remembered that, as a general rule, very very few properties
covered by insurance policies are actually damaged or destroyed.

7.1.33 Reinsurance

Reinsurance occurs if an insurer who has already insured specific property insures it with another insurer,
usually a larger company. This is done in order to spread the risk over a number of insurers. The person
originally insured has rights only against the insurer who has issued the policy, due to the privity of contract
rule.

7.1.34 Assignment

(i) A contract of fire insurance can be assigned only with the consent of the insurers. If they refuse to
give the consent, no assignment can take place: SADDLERS' COMPANY v BADCOCK (1743).

(ii) A life policy may be assigned by indorsement on the policy or by a separate instrument. Written
notice of the assignment must then be given to the insurer under s.3 of the (English) Policies of
Assurance Act 1867 (which is a prima facie applicable in Kenya).

7.1.35 Types of Insurance

The types of insurance which are generally available are:

i. Life assurance

This is a contract by which the insurer, in return for either a lump sum or periodical payments,
undertakes to pay the person for whose benefit the policy is effected, a sum of money:

(a) on the death of the person whose life is insured, or

(b) on a specified date, or on the death of the person whose life is insured, whichever happens
first.

In the case of (a), the policy is called a Whole life policy. In the case of (b), the policy is called an
endowment policy.
 In Dalby v The India and London Assurance Co. it was explained that a life assurance policy is
not a contract of indemnity. This is because a human being has no market value.

ii. Fire insurance

A fire insurance contract is intended to cover loss caused by fire during a specified period. The word
"fire" is usually defined in the policy. A fire insurance policy is a contract of indemnity.

iii. Motor Vehicle Insurance

A motor vehicle insurance contract is one effected pursuant to the Motor Insurance (Motor Vehicle
Third Party Risks) Act to cover any liability which a motorist may incur as a result of causing the
death or injury of a third party (including other motorists).

The third party has a statutory right to sue the insurer direct, and is not affected by the privity of
contract rule.

iv. Burglary insurance

A burglary insurance is a contract to indemnify the assured against loss arising from burglary. Such a
policy would be voidable at the option of the insurer if the property insured is deliberately
overvalued.

v. Accident insurance

An accident insurance is a contract by which the insurer agrees to pay a specified sum of money
upon the happening of certain events, usually death of the insured in an accident. A smaller sum is
usually payable in the event of the insured's disablement (total or partial), either on a monthly or
weekly basis. An accident insurance is not a contract of indemnity.

7.1.36 Regulation

Insurance business is regulated in Kenya by the Insurance Companies Act under which persons carrying on
insurance business as insurers need the authorization of the Commissioner of Insurance who has very wide
powers of regulation and investigation.

7.2 Causa Proxima non remota spectatur

7.3 Abandonment

7.4 Salvage

7.5 Reinstatement
 REINFORCING QUESTIONS
1. (a) In a contract of insurance explain the duty of disclosure that rests on the assured. What is meant by
an "insurable interest"?

(b) K owned a cottage by the sea which was valued at £30,000, though it was only insured for £15,000.
It was damaged by storms to the value of £10,000.

K wishes to make a claim against the insurance company for the damages. Advise K.

Would your advice be different if K's insurance policy contained a "subject to average" clause?

2. "A common carrier is an insurer of the goods carried". What does this statement mean and what are the
exceptions to it?

3. (a) What is the effect of the following words written within the crossing of a cheque:

i. "Not negotiable";
ii. "And Co"; and
iii. "Account payee"?

(b) H sold goods to J and received a cheque as payment. J changed his mind about the purchase and
instructed his bank, the Z Bank, not to pay the cheque. H presented the cheque for payment and the Z
Bank, having overlooked the stop order, paid it. J is now seeking to recover the money paid to H
from Z Bank. Advise J.
THE LAW OF TORTS
NATURE OF TORTIOUS LIABILITY

A tort is a civil wrong (not every wrong is a tort)

Tortious liability arises from the breach of a duty primarily fixed by law; this duty is towards persons generally
and its breach is redressible by and action for unliquidated damages.

Tort and Contract distinguished

TORT CONTRACT

The duty is fixed by law The duty is fixed by the parties

The duty is owed to persons The duty is owed to the parties to the contract.
generally

The remedies are few The remedies are far much wider.
(restricted)

Tort And Crime Distinguished

TORT CRIME

Is a wrong redressible by an Is a wrong the action of which involves

action for unliquidated punishment
damages

The party suing is an individual Almost always party suing is the state
or private person

Difference in terms

A person sued A person charged.

A person is found liable A person is found guilty

An act may both be a tort or a crime e.g. Libel

THE PARTIES TO A SUIT (CAPACITY)

(a) The Government

At common law no action in tort lay against the state (crown) for wrongs expressly authorised by the
crown or for wrongs committed by its servants in the course of their employment. Under the
Government Proceedings Act, Cap 40 Laws of Kenya the Government is Liable tortious acts.

Section 4(2) provides;

“Subject to the provisions of this act, the government shall be subject to all those liabilities in tort to which if it
were a full person of full age and capacity it would be subject;

In respect of torts committed by its servants or agents.

In respect of any breach of those duties which a person owes to his servants or agents at common law by
reason of being their employer.
In respect of any breach of duties attaching at common law to the ownership occupation, possession or
control of property.
However, SECTION 13A provides that before one can sue the government he must given a 30 days notice.

Dorset Yatch Co Ltd –v – Home Office

(a) Liability Of The Government

Facts; An action was brought by owner of property against the home office in respect of damage to his
property done by runaway Borstal boys. Seven borstal boys ran away one night when the three officers
in charge of them were, contrary to instructions, all in bed. They boarded one of the many vessels in
the harbour, started it and collided with the plaintiff’s yatch, which they then boarded and damaged
further.

Held ;the defendant (Home Office) was held liable for not protecting the plaintiff from the ravage of
the boys.

(b) Foreign Governments/Sovereigns

Diplomats and foreign sovereign states enjoy absolute immunity to criminal and civil liability before a
Kenyan Court unless the immunity had been waived by submission to Kenyan Jurisdiction (under the
Vienna Convention on Diplomatic Relations, 1961)

This applies only where the act was done in the exercise of the sovereignty of the state.
Immunity ceases when one engages in private and commercial ventures. Immunity can be waived
leading to a person being charged.

(c) Bankrupts

May sue or be sued for torts committed.

(d) Minors.

After an early period of uncertainty the common law adopted 21 years as the age of majority for most
purposes and it remained at this until1970 when it was reduced by statute to 18 (Family Law Reform
Act 1969) Minority is not a defence in tort. A minor can sue and be sued for tort. A minor can sue and
be sued for tort. A minor can however not sue or be sued in his own name but by his “next friend”
(guardian ad Litem)

In the law of tort there is generally no defence of minority and a minor is as much liable to be sued for
his tort as is an adult. In Gorely v Codd (1967 w.c.r

The defendant a 161/2 year old boy was held liable when he accidentally shot the plaintiff with an air
rifle in the course of ‘larking about.

Minority however be it a defence in an action for the tort of negligence or malice. This is to be inferred
from the fact that a young child may well be incapable of the necessary mental state for liability in such
torts. In an action for negligence against a young child, therefore, it is insufficient to show that he
behaved in a way which would amount to negligence on the part of an adult. It must be shown that his
behaviour was unreasonable for a child o his age. Parents are not liable for the torts o their children, but
in situations where it is established that the child was under control of the parent the commission of the
tort by the child will result to liability of the parent.

Persons of unsound mind.

Liability depends on whether the person knew what he was doing when he committed the tort. This can
be proven by a psychiatrist. Morris v Mardsen (1952) 1 All E.R 925

Facts; The defendant rented a room at a hotel while there he attacked the manager of a hotel. At that
time he was suffering from a disease of the mind. It was established that he knew the nature and quality
of his act, but he did not know that it was wrong.
 Held: As the defendant knew the nature and quality of his act, he was liable in tort for assault and
battery. It was immaterial that he did not know that what he was doing was wrong.

Unsoundness of mind is thus certainly not itself a ground of immunity from liability in tort, and it is
submitted that the true question in each case is whether the defendant was possessed of the requisite
state of mind for liability in the particular tort in which he is charged.

Robbers v Ramsbottom (1980)

One morning a 73-year-old accountant was about to drive his wife to the office when he suffered a quite
unheralded stroke that impaired his consciousness considerably. He forgot all about his wife and drove
off. He managed to negotiate a few corners but then struck a parked van. He told the van driver that he
felt alright and continued driving. Next he knocked a boy off his bike and finally rammed the plaintiffs
stationary car and injured the family by it.

Held; The defendant was liable despite his curious condition since it fell short of automatism and
complete loss of consciousness and because after striking the van he should have realized (though he
could not) that he was unfit to continue driving.

Husbands and Wives

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

(g) Corporations

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

Poulton v London and S.W. Railway Corp. (1867)

Facts: The plaintiff having taken a horse to an agricultural show by the defendants railway, was entitled
under arrangements advertised by the defendant to take the horse back free of charge on the production of
a certificate. The plaintiff accordingly produced a certificate and the horse was put in a box without
payment or booking and the plaintiff having taken a ticket for himself proceeded by the same train. At the
end of the journey the station master demanded payment for the horse and the plaintiff refusing to pay was
detained in custody by two policemen under the orders of the station master until it was ascertained by
telegraph that all was alright. An action being brought against the defendant for false imprisonment.

Held: That the railway company has power to apprehend a person traveling on the railway
without having paid to detain the goods or non-payment of carriage, consequently, as the
defendants would have had no power to detain the plaintiff on the assumption that he had
wrongfully taken the horse by the train without paying, there could be no authority implied
from them to the station master to detain the plaintiff on this assumption, and they were,
therefore, not liable or this act of the station master.

(h) Unincorporated Associations

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

(i) Partners

They are personally liable for their own torts. They can sue and be sued by writing down all the
names of the partners and that of the partnership. Each and every partner is liable for a tort
committed in the course of business.

Hamlyn v Houson (1903) 1 K.B. 81

Facts one of the partners of a firm on behalf o the firm, induced a servant of the plaintiff by
bribery to commit a breach of his contact of service.
Held The firm was held liable for the act of one of its partners.

(j) Aliens
A friendly alien is under no disability and has no immunity. An alien enemy is one whose state
or sovereign is in war with the sovereign of the state in question or one who, whatever his
nationality, is voluntarily resident or carries on business in an enemy country. As thus defined,
an alien enemy, unless he be within the realm of license of the sovereign, cannot sue in the
sovereign’s courts. He can however be sued and can defend an action and if the decision goes
against him, he can appeal.

GENERAL CHARACTERISTICS OF TORTIOUS LIABILITY

Forms of Liability

There are different ways in which liability in tort may arise;

Liability may be imposed as a legal consequence of a person’s act, or of his omission if he is
under a legal duty to act. Liability may also be imposed upon one person as a legal
consequence of the act or omission of another person with whom he stands in some special
relationship such as that of a master and servant (vicarious liability)
In some cases liability is based upon fault; sometimes an intention to injure is required but more
often negligence is sufficient. In cases of strict liability however liability is in varying degrees
independent of fault.
Most torts require damage resulting to the plaintiff as a consequence of the defendants conduct.
However in some cases as trespass and label proof of actual damage is not required.

Intention or negligence or the breach of statutory

Intention
Some torts require intention on the part of the wrong doer. Intention can be inferred from the conduct of
the wrong doer. Whatever a man thinks must be deduced from what he says and does. A person
intents a consequence if it is his desire or motive to bring it about.

Negligence
‘Negligence’ may signify full advertence to ones conduct and its consequences. More usually, however,
it signifies inadvertence by the defendant, but the defendant cannot escape liability because he adverted
to the risk if the case is one where even inadvertence would saddle him with liability. An illustration of
full advertence is the case of Vaughan – v – (Menlove 1937) 3 Bing N.C. 468

Facts The defendant had been warned that his was likely to overheat and catch fire, which might spread
to the land of his neighbour. He said he would chance it and the stack actually caught fire.
Held That the defendant was liable.

Breach of strict duty

In some torts, the defendant is liable even though the harm to the plaintiff occurred without intention or
negligence on the defendant’s part. This it was laid down in the famous case of Rylands v Fletcher
(1868) : R 3 H L 330 340 that “if a person brings or accumulates on his land anything which , it should
escape may cause damage to his neighbours, he does so at his own perk. If it does escape and cause
damage, he is responsible, however careful he may have been and whatever precautions he may have
taken to prevent damage.”
Liability in nuisance may be strict where the defendant himself or someone for whom he is responsible
has created the nuisance.

‘Reasonable’ and ‘Reasonable man’

It is important to explain the terms ‘reasonable’ and ‘reasonable man’ as they recur frequently in the law
of tort. ‘Reasonable conduct’ may be described as the behaviour of the ordinary man in any particular
even or transaction, including in such behaviour obedience to the special direction (if any) which the law
gives him for his guidance in that connection. Lord Bowen visualized the reasonable man as ‘the man
on the clapham omnibus.

Where a person exercises any calling, the law requires him, in dealing with other people in the course of
that calling to exhibit the degree of skill or competence which is usually associated with its efficient
discharge. Nobody expects the man on the clapham omnibus to have any skill as a surgeon, lawyer,
doctor etc, unless he is one; but if he professes to be one then the law requires him to show such skill as
any ordinary member of the profession or calling to which be belongs, or claims to belong would
display.
The judge has to decide what ‘reasonable’ means, and it is inevitable that different fudges may take
variant views on the same question.

Motive and Malice

Motive signifies the reason for conduct. Malice may mean ‘evil motive’ or it may signify doing an act
willfully without just cause or excuse.
As motive, the general rule is that if conduct is presumptively unlawful, a good motive will not
exonerate the defendant, and that, if conduct is lawful apart from motive, a bad motive will not make
him liable.
To the first part however, defenses like necessity and private defense are exceptions for they depend to a
certain extent on a good motive on the part of the defendant.

GENERAL DEDENCES IN THE LAW OF TORT

A Plaintiff’s default
If the plaintiff were to sue, and the defendant would prove that the plaintiff was on the wrong,
that can constitute a defence. under common law, if one contributed to a tort that barred him
from suing. The law was however changed by statute under the law reform (Contributory
negligence) act 1945 . A plaintiff on the wrong can recover for as long as he has not contributed
100% to the tort. Thus if he contributed 40% he can recover 60%.

Trespasses

Under common law there was no liability for a tort committed on a trespassing plaintiff. The
law has however changed to allow trespassers to sue for torts committed.
 British Railway Board v Heringtton (1972)
Fact; The defendant’s electrified railway line ran between two national trust properties where
children of Mitcham played. There was a fence alongside the railway line and a foot bridge over
it. For some time it had been possible to cross the railway line without using the bridge because
at the point where the path turned along the fence to reach the bridge the fence had gone out of
repair. Railway staff had seen children play at this point. One Monday, the Plaintiff; a boy of
six strayed from his companions, went over the dilapidated fence and was severely burnt on the
electrified rail.

Held: that the plaintiff was entitled to recover full damages from the defendant. The railway
board in the circumstances had a duty to take reasonable steps to defer children from straying
from the public spent on to the electrified railway line. This included proper maintenance of the
fence. But the railway board failed to repair the broken down fence even after they had been
notified that children had been seen on the line. There was a clear breach of duty (the fact that
the plaintiff was a trespasser was not a defence.)
However in a situation where the plaintiff was committing a criminal act, he cannot recover for
a tort committed by the defendant (ex turpi causa non oritur actio)
National Coal Board v England (1954 J A C 4003)
A mine worker, injured by the premature explosion of a detonator, sued the mine owner for
damages for breach of statutory duty by their servant a short firer who had admittedly
committed a breach of the explosives in coal mine order by firing without first ascertaining that
all persons in the vicinity had taken proper shelter, but the injured mine worker had also
committed a breach of the regulations in that by agreement with the shirt firer he had
undertaken to couple up the cable to the detonator a duty imposed by regulation to the shirt
firer and was in the act of coupling up when the explosion occurred.

Held:

The short firer’s statutory duty did not supersede his common law duty
and he was liable thus rendering his employer vicariously liable.

The injured mine-worker was guilty of contributory negligence but he

was not solely liable for his own injury by depcuting from the scope of
employment but was carrying out his employment.

That his breach of statutory obligations imposed to ensure safe working

did not defer him from suing as bringing him within the principle ‘ex
turpi causa non oritur actio’

Held further; that the total amount of damages assessed should be reduced by one quarter
because of contributory negligence.
Harisson v Jackson (1977) 16 S A S R 182
Facts; that the plaintiff knew that the defendant was disqualified from driving but he took a ride
with him. The car overturned and the plaintiff was injured. The plaintiff sued (Driving when
disqualified is a criminal act)

Held:
The negligence driving had nothing to do with the defendants criminal act.
It follows that the plaintiff is bared from suing only when the criminal act directly resulted to
injury.

B CONTRIBUTORY NEGLIGENCE (Discussed as part of A above)

C ACT OF GOD
 Where damage is cause directly by natural circumstances which no human foresight can
provide against and of which human prudence is not bound to recognize the possibility, the
defence of act of god applies. For this defence to succeed, it must be shown that the act was not
foreseeable.

Nicholas v marsland 918760 Ex. 1

Facts The defendant for many years had been in possession of some artificial ornamental lakes
formed by damming up a natural stream. An extraordinary rainfall, ‘greater ad more violent
than any within the memory of witnesses’ broke down the artificial embarkments and the rush
of escaping water carried away for bridges in respect of which damage the plaintiff sued.

Held: Thee defendant was not liable for an extra-ordinary act of nature which she could not
reasonably anticipate.

D VOLENYL NON FIT INJURIEA (VOLUNTARY ASSUMPTION OF RISK)

There are some occasions when harm – sometimes even grievous harm – may be inflicted on a
person for which he has no remedy in tort because he consented, or at least assented to the
doing of the act which caused his harm. Simple examples are the injuries received in the course
of a lawful game or sport or in a lawful surgical operation.

If the defendant desires to succeed on the ground that the maxim violent non fit injuria is
applicable, he must obtain a finding of fact that the plaintiff freely and voluntarily with full
knowledge of the nature and extend of the risk had impliedly agreed to incur it.

Requirements.
There must be consent
There must be voluntariliness and knowledge.

Harry v Dyke (1979) R T R 265

X sold a car ‘as seen with faults’ to Y. Y sold the car to a third party. It crashed and injured the
third party who sued X.

Held: X was not liable because he had indicated that the car was faulty.

The knowledge must be full and complete i.e. the full extent of the risk must be
known.

Stermer v Lawson (1927) S W W R 628

Allowed a 17 year old minor to ride a motor-cycle. He told the minor to be careful the minor
crashed.

Held: A was liable because the minor could not know the full extent of riding the motorcycle.
(the defence of volent did not apply.)

Knowledge of danger is not necessarily sufficient. Under common law there is a positive duty
not to permit the existence of danger in lack of which here is an absolute right of access e.g. a
highway or a market place. The defendant pleaded volent non fit injuria.

Held: knowledge of danger was not sufficient. The defence could not succeed.
 Instances where the defene of volent non fit injuria may apply

An express consent to the breach of duty – this nullifies the defence.

Chapman v Ellesmere (1932) 2 DB 431

The plaintiff was a member of jockeys club. After every race the stewards of the club
published a stewards report in the jockey’s journal relating to the conduct of trainers and
other persons connected with the running of horse-races under the rules of the club. A
publication was made in the jockey’s journal concerning the conduct of the plaintiff. The
plaintiff sued for defamation.

Held membership in the jockeys club gave an express consent that the steward’s report
would be published in the jockeys journal concerning any of the members. The defendant
was thus not liable for defamation.

Surgical operations
Consent to the surgical operation must be freely given. The surgeon is under an obligation
to inform the patient of all the risks involved and the patient must consent to taking such
risk. A minor who has reached 16 years may give a valid consent to the medical treatment
himself under section 8 of the law reform at 1969 and he may do so at common law even
below that age if he is capable of understanding the consequences. The position is less clear
where a 16 year old refuses treatment which the parent wishes him to have; perhaps the
parents power to impose treatment eases whenever the minor acquires the capacity to
consent independently to treatment. In young children however, consent of a parent or
guardian to treatment which is reasonably necessary protects the doctor against an action
for trespass to person.

Consent to one medial procedure does not justify another as where a condition is
discovered and treated for mere convenience.

Diplock LJ Stated:
‘A person attending a game or competition takes the risk of any damage caused to him by
any act of a participant done in the course of and for the purpose of the game or competition
notwithstanding that such an act may involve an error of judgement or a lapse of skill,
unless the participant’s conduct is such as to evince a reckless disregard for the spectators
safety.’

Drunken drivers

Dan v Hamilton
A lady took a ride in a car driven by a drunken drive. There was an accident and she was
injured.
Held: The driver could not avail himself of the defence of volenti non fit injuria.

Except perhaps in extreme cases, the maxim does not apply to the tort of negligence so as to
prelude from remedy a person who has knowingly and voluntarily accepted the risk which
may arise from the driver of a car under the influence of drink and has been injured as a
consequence.

Rescue cases
 Quote from Cardzo J
‘danger invites rescue. The cry of distress is the summons to relief. The law does not ignore
this reactions of the mind in tracing conduct to its consequences. If a person is in danger and
a person trying to rescue him is injured, the person in danger is liable and they cannot sue.

Cutlerr v united Dairies ltd 1933 2 D B 397

The plaintiff saw a man with a heard of horses which were becoming unruly. He tried to
help but was injured. He sued.

Held: The defendant was not liable as there was no danger posed to anyone (the defence
succeeded)

Implied consent by servants

An employer cannot plead the defence of volent he is liable for injuries suffered by his
servant.

Bakers v James 1921 2 K B 674

The plaintiff office car was faulty. She complained but the defendant never took action.
Nevertheless she drove it and got an accident. The employer pleaded the defence of volenti.

Held: The defendant (employer) was liable and the defence could not succeed.

E. NECESSITY AND PRIVATE DEFENCE

The critical thing is that the act done has to be reasonable. Necessity is limited to cases involving
an urgent situation or imminent peril. Examples include pulling down a house on fire to
prevent its spread to other property, throwing goods overboard to lighten a boat in a storm and
medical assistance rendered to an unconscious person. The measures taken must be reasonable
and this will depend on whether there is human life or merely property in danger.

Kirks v Gregory (1876) I EX. D 555

X died in a state of delirium tremens. His servants were feasting and drinking in the house. X’s
sister in law removed his jewellery from the room where he lay dead to another room for safety
sake. Some unknown person stole it.

Held: The sister in law was liable because there was no proof that her interference was
reasonably necessary.

Private defence involves reasonable defence to oneself or one’s property and of those whom one
is bound to protect. It must always be a question of fact, rather than of law, whether violence
done by way of self-protection is proportionate to warding off the harm which is threatened.

Cockcroft v Smith()17052 Salk 642

A court clerk sued the A G for biting off his finger. The A G alleged that the clerk was pointing
at him and wanted to pork his eye.

Held: The act of biting off the finger was unreasonable. Excessive fore was used hence the
defence of self-defence was not available.

Necessity differs with self-defence in that in avoided by a reasonable man at the moment at
 which it occurred and it is common knowledge that a reasonable man is not credited by the law
with perfection of judgement.

Per lord Dunedin in Fardon v Harcourt – Rivington (1932) 146 l t 391

‘people must guard against reasonable probabilities, but theey are not bound to guard against
fantastic possibilities.’
The burden is on the defendant to prove that the accident occurred despite the exercise of
reasonable care on his part.

8.1.1 NEGLIGENCE

In DONOGHUE v STEVENSON, Lord Macmillan stated:

"The law takes no cognizance of carelessness in the abstract. It concerns itself with carelessness only
where there is a duty to take care and where failure in that duty has caused damage. In such
circumstances carelessness assumes the legal quality of negligence and entails the consequences in law of
negligence...

The cardinal principle of liability is that the party complained of should owe to the party complaining a
duty to take care and that the party complaining should be able to prove that he has suffered damage
in consequence of a breach of that duty".

The ingredients of negligence are:

(a) A legal duty on the part of the defendant toward the plaintiff to exercise care in such conduct of the
defendant as falls within the scope of the duty

Such duty will exist if the plaintiff and defendant are neighbours within Donoghue v Stevenson.

(b) Breach of that duty.

The breach will occur if the defendant caused injuries or losses which he could have avoided by using
reasonable care.

(c) Consequential damage to the plaintiff (i.e. negligence is not actionable per se).

These ingredients cannot always be kept apart, and it has been said that they are simply three different ways
of looking at one and the same problem.

In DONOGHUE v STEVENSON, the appellant's friend purchased a bottle of ginger beer from a retailer in
Paisley and gave it to her. The respondents were the manufacturers of the ginger beer. The appellant
consumed some of the ginger beer and her friend was replenishing the glass, when, according to the
appellant, the decomposed remains of a dead snail came out of the bottle. The bottle was made of dark glass
so that the snail could not be seen until most of the contents had been consumed.

The appellant became ill and sued the manufacturers claiming damages.

The question before the House of Lords was whether the facts outlined above constituted a cause of action in
negligence.

The House of Lords held by a majority of three to two that they did. Delivering his judgment, Lord Atkin
stated, inter alia:
 "......In order to support an action for damages for negligence the PLAINTIFF has to show that he has been
injured by the breach of DUTY OWED TO HIM in the circumstances by the defendant to take reasonable
care to AVOID SUCH INJURY.... we are solely concerned with the question whether as a matter of law in
the circumstances alleged the defendant owed any duty to the plaintiff to take care....In English law there
must be, and is, some general conception of relations giving rise to a duty of care... The liability for
negligence, whether you style it such or treat it as in other systems as a species of culpa is no doubt based
upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts or
omissions which any moral code would censure cannot in a practical world be treated so as to give a right to
every person injured by them to demand relief. In this way rules of law arise which limit the range of
complainants and the extent of their remedy. The rule that you are to love your neighbour becomes in
law, you must not injure your neighbour; and the lawyer's question, who is my neighbour? receives a
restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee
would be likely to injure your neighbour. "Who, then, in law, is my neighbour? The answer seems to me to
be—persons who are so closely and directly affected by my act that I ought reasonably to have them in
contemplation as being so affected when I am directing my mind to the act or omissions which are
called in question.

A manufacturer of products which he sells in such a form to show that he intends them to reach the
ultimate consumer in the form in which they left him with no reasonable possibility of intermediate
examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of
the products is likely to result in injury to the consumer's life or property, owes a DUTY to the consumer to
take that reasonable care. It is a proposition that I venture to say no one in Scotland or England who was not
a lawyer would for one moment doubt." Another case in negligence is PARIS v STEPNEY BOROUGH
COUNCIL, in which the plaintiff was employed by the defendants on vehicle maintenance. He had the use
of only one eye and the defendants were aware of this. The plaintiff was endeavouring to remove a belt from
the chassis of vehicle, and was using a hammer for the purpose, when a chip of metal flew into his good eye
so that he became totally blind. The plaintiff claimed damages from his employers for negligence in that he
had not been supplied with goggles. The defendants showed in evidence that it was not the usual practice in
trades of this nature to supply goggles, at least where the employees were men with two good eyes. The trial
judge found for the plaintiff, but the Court of Appeal reversed the decision on the grounds that the plaintiff's
disability could be relevant only if it increased the risk, i.e. if a one-eyed man was more likely to get a
splinter in his eye than a two eyed man. Having found that the risk was not increased they allowed the
appeal. The House of Lords reversed the judgment of the Court of Appeal, holding that the gravity of the
harm likely to be caused would influence a reasonable employer, so that the duty of care to a one-eyed
employee required the supply of goggles, and Paris therefore succeeded. This case should be compared to
HALEY v LONDON ELECTRICITY BOARD, in which the appellant, Haley, a blind man who was on
his way to his work as a telephonist, tripped over an obstacle placed by servants of the London Electricity
Board near the end of a trench excavated in the pavement of a street in Woolwich. He fell and suffered an
injury which rendered him deaf and brought about his premature retirement from his employment. The
guard was sufficient warning for sighted people but was by its nature inadequate to protect or warn
the blind. It consisted of a hammer hooked in the railings and resting on the pavement at an angle of thirty
degrees, and Haley's white stick, which he was properly using as a guide, did not encounter the obstacle with
the result that instead of warning him he fell over it. Evidence was given that about one in five hundred
people were blind and there were 250 registered blind people in Woolwich, many of whom were capable of
walking in the streets alone, taking the normal precautions such blind persons were accustomed to take. The
House of Lords held, reversing the decision of the Court of Appeal, that the London Electricity Board were
liable in negligence. Those engaged in operations on the pavement of a highway must act reasonably to
avoid danger to passers-by, including blind people who must, however, also take reasonable care of
themselves. The Board had not fulfilled this duty and were liable in damages for negligence which were
assessed at £3,000 general damages, and £2,250 special damages, Haley's retirement being accelerated by
four years.

8.1.2 "Damnum sine injuria"

Although a plaintiff who has suffered damage as a consequence of the careless act of another may sue that
other for the loss he has suffered, this may not be so in some cases, as illustrated by BOURHILL v
YOUNG. The plaintiff, a pregnant Edinburgh fishwife, alighted from a tramcar. While she was removing
her fish-basket from the tram, Young, a motor cyclist, driving carelessly but unseen by her, passed the tram
 and collided with a motorcar some fifteen yards away. Young was killed. The plaintiff heard the collision,
and after Young's body had been removed, she approached the scene of the accident and saw a pool of blood
on the road. She suffered a nervous shock and later gave birth to a stillborn child. The House of Lords held
that her action against Young's personal representative failed, because Young owed no duty of care to
persons whom he could not reasonably anticipate would suffer injuries as a result of his conduct on the
highway. A person is under a duty to guard against reasonable probabilities, not fantastic possibilities. Such
situations are known as "damnum sine injuria".

8.1.3 "Res ipsa loquitor"

A plaintiff may be relieved of the legal duty of proving the defendant's negligence where the maxim "res ipsa
loquitor" ("the thing speaks for itself") applies. In such cases the negligence of the defendant is presumed
and he must successfully rebut it in order to escape liability for negligence.`

In BYRNE v BOADLE
The plaintiff brought an action in negligence alleging that, as he was walking past the defendant's shop, a
barrel of flour fell from a window above the shop and injured him. The defendant was a dealer in flour, but
there was no evidence that the defendant or any of his servants were engaged in lowering the barrel of flour
at the time. The defendant submitted that there was no evidence of negligence to go to the jury, but it was
held that the occurrence was in itself evidence of negligence sufficient to entitle the jury to find for the
plaintiff, in the absence of an explanation by the defendant.

In SCOTT v LONDON AND ST. KATHERINE'S DOCKS CO.

The plaintiff, a Customs officer, proved that when he was passing in front of the defendant's warehouse six
bags of sugar fell upon him. It was held that the maxim res ipsa loquitor applied. In the course of his
judgment Erle C.J., said: `...where the thing is shown to be under the management of the defendant, or his
servants, and the accident is such as, in the ordinary course of things, does not happen if those who have the
management use proper care, it affords reasonable evidence, in the absence of explanation by the defendant,
that the accident arose from want of care'.

NOTE:

(This case was followed in Ward v Jesco Stores, (1976). AllE.R.219, where the Court of Appeal held that
an accident which occurred due to spillage of yoghurt on a shop floor put an evidential burden upon the
defendant shopowners to show that the accident did not occur through any want of care on their part. They
were not able to satisfy that burden and the plaintiff succeeded.)

8.1.10 Contributory negligence

There may be negligence on the part of the plaintiff and also on the part of the defendant with the result that
the liability is divided according to the proportion of fault attributed to each one of them. This "proportion
fault" is known as contributory negligence.

8.1.11 The "Neighbour principle"

 For purposes of the law of negligence, a person's neighbour is determined by the activity that he
engages in at a given moment, because it is the activity in question that is likely to cause damages if done
carelessly.

Examples:

1. A motorist's neighbours are other users of the road he is travelling on.

2. A manufacturer's neighbour is the consumer for whom the product is intended.
3. An auditor certifying the correctness of the accounts he has audited may be sued by people who
relied on the accounts to buy the company's shares or lend it money: Hedley Byrne v Heller and
Partners

SPECIFIC TORTS

Trespass
There are 3 classes/categories of trespass.
Trespass to the person
Trespass to land
Trespass to goods

Trespass to the person

May be committed negligently (i.e. inadvertently) as well as by intention. There are 3 main forms
of trespass to person.
Assault
Battery
False imprisonment; and their common element is that the wrong must be committed by ‘direct means’.
Where however physical harm is inflicted by indirect means there may be liability under the so-
called “rule in Wilkinson v Downtown” (discussed later).

Battery: It is the intentional and direct application of force to another

person. Where the defendant intentionally does an act which directly and
physically affects the person of the plaintiff he commits battery. Battery like
other form s of trespass does not require an intention to commit the requisite
interference with the plaintiff the plaintiff the plaintiff’s person.. Mistake of
fact is no defence in trespass however reasonable the mistake.

Meaning of Force
Any physical contact with the body of the plaintiff or with his clothing is sufficient to
amount to force. There is battery where the defendant shoots the plaintiff from a distance
just as much as when he strikes him with his fist. Mere passive obstruction is however not
battery. If however there is force in the technical sense, no physical hurt is necessary, for all
forms of trespass are actionable per se i.e. without prove of damage.

Where there is express or implied consent to contact the plaintiff cant sue. Life would be
difficult if all bodily contact were actionable and courts have struggled to find some further
ingredient to distinguish battery from legally unobsectionable conduct.

In Collins v Wilcock (1984) I.W.L.R. 1172, Goff L J stated that apart from specific defences
such as lawful authority in effecting an arrest or prevention of crime, bodily contact was not
actionable if it was generally acceptable in the ordinary conduct of daily life.

However, the court of appeal in Wilson v Prigle while not wholly rejecting this approach
has laid down that battery involves a ‘hostile’ touching by the defendant i.e. where he
wilfully interferes with the plaintiff inn a way to which he is known to object.

Touching another person in the course of a conversation in or to draw his attention to

something is no battery but ‘an unwanted kiss is as much actionable as a blow’.(per lord
Holt C J) in Cole v Turner 1704 6 Mod 149

For battery there must be a voluntary act by the defendant intended to bring about the
contact with the plaintiff. The battery need not be committed with the person of the person
of the defendant. It is battery to strike the plaintiff by throwing a stone at him. Provided
the force used has its effect on the person of the plaintiff’s person must be intended by the
defendant e.g. it is battery to remove a chair on which the plaintiff is about to sit as a result
of which he falls on the ground.

In Fagan v Metropolitan Commissioner of police – 1969 I Q B 439

The defendant accidentally drove his car on the foot of a police constable. He then delayed
in reversing the car thus preventing the constable from escaping and knowing that the
constable’s foot was trapped.

Held: He was liable for criminal assault.

One situation that poses difficult arises where A intends to commit battery against B but
instead and by mistake strikes C. In criminal law a battery is committed (R vs Latimer) but
it is doubtful that the common law would follow this doctrine.

Assault
It is an act of the defendant which causes to the plaintiff reasonable apprehension of the
infliction of a battery on him by the defendant. So to throw water at a person is an assault
but if any drops fall upon him it is battery. (Pursell v Horne (1838) 3 N & P 564).

Riding a horse at a person is an assault but riding it against him is a battery. Pulling away a
chair as a practical joke from a person who is about to sit on it is probably an assault until he
reaches the floor when it becomes a battery for when he is falling he reasonably expects that
the withdrawal of the chair will result in harm to him (assault). Assault of course requires
no contact with the physical person of the plaintiff because its essence is conduct, which
leads the plaintiff to apprehend the application of force. In majority of the cases an assault
precedes a battery, perhaps by only a very brief interval but there are examples of battery
where the plaintiff has no opportunity of experiencing any apprehension before the for e is
applied e.g. a blow inflicted from the back by an unseen assailant. There can be assault
without a battery as where the defendant ahs no intention of carrying through his
threatening gesture but knows that the plaintiff is unaware of this. Similarly, if the blow is
intercepted or prevented by a third person.

Stephens v Myers (1840) 4 C & P 349

 The plaintiff was chairing a parish meeting. The defendant, who sat at the same table some
six or seven places away from then plaintiff became voiciferous and by a large majority it
was resolved that he be expelled. He said that he would rather pull the plaintiff out of the
chair than be ejected and he advanced with clenched fist upon the plaintiff but one to the
plaintiff.

Held: The defendant was liable for assault.

Ingredients of assault

Can assault be committed verbally?

Though assault involves no contact it is often said that some bodily movement is
required and that threatening words alone are not therefore actionable. Authorities on
this point are divided and go both ways.

In Meades’s case (1823) Law C.C 184 which was a criminal prosecution for murder, the
court said no words or singing are equivalent to assault. The basis of this obiter dictum
has however been discounted and the position now is that whether or not a verbal
threat will be held to be an assault will depend on the facts of each case and whether or
not it can be said that the defendant intended to implement his threats.

In Read v Cocker.

The defendant who had paid rent on behalf of the plaintiff visited the plaintiff with
some of his workers and threatened the defendant with physical violence in order to
make him leave the premises. The workers clustered around the plaintiff and
committed such threatening actions as tucking up their sleeves and aprons.

Held: The defendant was liable for assault.

In Baron v Armstrong

Threats of violence over the telephone were held to be assault on the grounds that such
threats might give rise to as sufficiently immediate apprehension of their
implementation. Words may however qualify or explain an otherwise threatening
action so as to render it no assault.

In Tuberville v Sawage the court stated that the defendant did not commit assault by
placing his hand on his sword in the plaintiffs presence because he said the words ‘if it
were not assize-time, I would not take such language from you.’ Where however words
take a from of a continuing threat e.g. your money or your life, this seemingly
constitutes an assault.

In Police vs Greaves, the defendants threat of committing a knife attack on certain

policemen if they should uproot a plot near him or did not leave his premises
immediately was held to be assault.

Must the defendant intent to commit a battery?

Assault is committed where the plaintiff apprehends the commission of a battery on his
person if the defendant does not intent to commit a battery but induced a belief in the
plaintiffs mind that he is about to do so, he is nevertheless liable for assault. Pointing a
loaded gun at a person is of course an assault but if the gun is unloaded it is still assault
unless the person at whom it is pointed knows this.
What must the plaintiff apprehend

Suppose the plaintiff is an unusually fearful person in whom the defendant can induce
the fear of an imminent battery though a reasonable man would not have fear in those
circumstances, does the defendant commit assault? The better view is that the test is
based upon the subjective intention of both parties thus there is battery if the defendant
intends to create fear of commission of a battery whether or not he knows the plaintiff
to be a fearful person and the plaintiff actually has this fear.

In Smith vs Superintendent of Working Police Station (1983) Crim. L R 323:

The defendant was convicted of criminal assault when he entered the grounds of a
private house and stood at the window seriously frightening its occupant who was
getting ready for bed.

The plaintiff must however apprehend a battery thus it is not assault to stand still at the
door of a room barring the plaintiff’s entry. It would also not be assault to falsely cry
‘fire’ in a crowded place.

Must damages be proved?

Both torts of assault and battery are actionable per se. Where the defendants act has caused no
damage the courts may award only nominal damages but the court may also award aggravated
damages because of the injury to the feelings of the plaintiff arising from the circumstances of
the commission of the tord.

False Imprisonment
Committed by a person who unlawfully intentionally and directly places a total restraint on
the liberty of the plaintiff. It is actionable per se. ‘False’ is used to imply erroneous or
wrong. It is possible to commit the tort without imprisonment of a person in the common
acceptance of that tort in fact neither physical conduct nor anything resembling prison is
necessary. If a lecturer locks his students in a lecture room after the usual time of dismissal
that is false imprisonment. So also is the case where a person is restrained from leaving his
own house or part of it or even forcibly detained in a public street. A person is said to be a
prisoner if he has no liberty to go freely at all times to all places that he would like to go.

It has been held in Grainger v Hill (1838) 4 Bing N.C 212 that imprisonment is possible
even if the plaintiff is too ill to move in the absence of restraint.
Ingredients of the tort.

Knowledge of the plaintiff

Knowledge of the restraint is not necessary but may affect the quantum of damages.

In Meering v Graham White Aviation Co

The plaintiff was being questioned at the defendants company in connection with
certain thefts from the defendants company. He did not know of the presence of two
works police outside the room who would have prevented his leaving if necessary.

Held the defendant was liable for false imprisonment.

Arking L J said ‘it appears to me that a person can be imprisoned without his knowing
it. I think a person can be imprisoned while he is asleep or in a state of drunkenness,
 while unconscious or while he is a lunatic of course the damages might be diminished
and would be affected by the question whether he was conscious or not’

In Herring v Boyle (1834) 1 CR. M & R 377 where the court held that there was no false
imprisonment of a school boy wrongfully kept in school during holidays unaware of
the restraint has been regarded by the latter authorities as wrongly decided.

Intention and directness

The tort is defined to exclude negligent imprisonment of another person. The tort must
be intentional and should be committed directly. Where for reason of lack of intention
or directness the plaintiff cannot establish false imprisonment an action in negligence
may still be available.

In Sayers v Harlour U.D.C

The plaintiff became imprisoned inside the defendants toilet because of negligent
maintenance of the door lock by the defendants servants. In trying to climb out of the
toilet she fell and was injured. She recovered damages from the defendant because it
was a reasonable act on her part to escape from a situation in which the defendant by
his negligence had placed her. An action for false imprisonment would not have been
available because there was no direct act of imprisonment.

The restraint must be complete

There must be a total restraint placed upon the plaintiffs freedom of action

In Bird v Jones

The defendant closed off the public footpath over one side of a bridge. The plaintiff
wishing to use the footpath was prevented by the defendant. In the plaintiffs action one
of the questions that was necessary to decide was whether the defendant’s act
amounted to false imprisonment.

Held: It did not since the defendant has not placed a total restraint on the plaintiff. The
blocking of a part of a public highway might be a public nuisance for which the plaintiff
could bring an action in tort. if he could show special damage arising from.

Provided the area of restraint is total it does not seem to matter that it is very large.
There has been a difference of opinion between the court of appeal and the lower court
son the circumstances in which a person already the lawfully imprisoned in a prison
may be regarded as falsely imprisoned.

In R v Deputy Governor of Prison, there was an agreement that imprisonment under

intolerable conditions would amount to false imprisonment. The C.O.A however
required knowledge of those conditions by the defendant but the lower courts thought
that a defence would exist here under the provisions of the prisons Act.

There is of course false imprisonment where a prisoner is detained beyond the legal
date of his release. (Cowell v Corrective Services Commissioner)

Reasonable escape
There is no false imprisonment if a reasonable escape route is available.

In Wright v Wilson, false imprisonment was not committed where the plaintiff could
escape by trespassing on the land of a third party. What is a reasonable escape route
 depends on the circumstances of the case. The mere fact that the plaintiff is able to take
advantage of an escape route does not mean that he should do so. As expert swimmer
might be justified in not taking advantage of an escape route offered by swimming if he
thought that release by other means would soon become available. An escape route
which involves a risk of injury to the plaintiff may be regarded as unreasonable.

Trespass to land
It is constituted by unjustifiable interference with the possession of land. Trespass to land is not
criminal in the absence of some special statute, which makes it so.

Possession: Since trespass to land involves interference with possession it is necessary that the
plaintiff proves possession to the land. Mere physical presence on the land or the user or de facto
control of it does not amount to possession sufficient to bring an action of trespass. A lodger in
another’s house does not have possession nor does a servant occupying room in the master’s
house. On the other hand a lessor of land gives up possession to his tenant so that the tenant
alone can bring an action for trespass during the lessor unless of course the lessor’s entry was
effected in accordance with the provisions of the lease. The lessor can only bring proceedings for
trespass during the currency of the lease if the entry has caused permanent damage to the land
leading to a reduction in the value of his version such as would result from the cutting of trees or
the pulling down of buildings.

Interference: The plaintiff must prove that the possession has been disturbed or interfered with by
the defendant. The most obvious example is unauthorized walking upon the plaintiff’s land or
going into the buildings upon it but it is equally trespass to throw things on the plaintiffs land or
allow cattle to stray on it. If the defendant has been given permission to enter into the plaintiff’s
land but acts in excess of the permission or remains on the land after the permission has expired,
he commits trespass.

Ingredients

There should be intention

Tortuous liability for trespass to land requires proof of intention or negligence on the part of
the defendant. Intention or negligence in this tort must however be defined carefully for it
is clear law that envy upon another’s land is tortuous whether or not the entrant knows he
is trespassing. Thus there is no defence that the only reason for his entry upon another’s
land was that he had lost his way or even that he genuinely but erroneously believed that
the land was his. Majority of trespasses to land are for legal purposes, self evidently
intentional – I intend to enter upon your land if I consciously place myself upon what
proves to be your land even though I neither knew nor could reasonably have known that it
was not mine.

There must be entry.

May constitute either physical entry by the defendant into the defendants land or
permitting entry of any substance or thing into the land e.g. waster or animals.

However in Perera v Vandiya the defendant – landlord quarrelled with the plaintiff –
tenant. He turned off the electricity and gas main sockets which were in his land – the
defendant without entering the rented premises. The tenant sued for trespass.

Held: There was no trespass to the land as the landlord had neither entered the land in the
tenants possession nor permitted entry into it. Whether entry/invasion to the airspace
above a man’s land amounts to trespass depends on the height of entry. Although intrusion
into air space at a relatively low height constitutes trespass it is now settled law that the land
owners’ rights in airspace extent only to such height as may be necessary for the ordinary
use and enjoyment of the land and structures on it so that the flight of an aircraft ‘several
hundred feet’ above a house is not a trespass at common law. But if an aircraft, or anything
 from it falls upon the land or comes into contact with a structure on it that might be trespass
no matter the height from which it fell.

In Kelsen v Imperial Tobacco Co. – 1957 2 Q.B 334

Mc Nair J held that an advertising sign erected by the defendants on their own property
which projected into the airspace above the plaintiffs shop created a trespass.

As regards the subsoil, the general rule is that the subsoil below ones land is part of his
possession. Any intrusion upon the subsoil is as much trespass as entry upon the surface in
some cases the subsoil and the surface may be possessed by different persons. If A is in
possession of the surface and B of the subsoil and I walk upon the land that is trespass
against A but not against B. if I dig holes vertically in the land that is trespass against both
A and B. If I bore a tunnel from my land into B’s subsoil that is trespass against B only.

The entry must be voluntary

Where entry is involuntary there is no liability.

In Smith v Stone

The defendant was thrown into the plaintiff’s land by a gang. The plaintiff sued him for
trespass.

Held Defendant not liable as the entry was not voluntary.

In Gilbert v Stone
The defendant was confronted by robbers. He ran into the plaintiffs land to take shelter.

Held: The entry was voluntary and thus the defendant was liable for trespass to land.

The act must be direct

For trespass t land to occur the injury or act must be direct and immediate. If it is indirect or
consequential there may be a remedy in nuisance or negligence but not in trespass. If A
plants a tree on B land that is trespass but if the roots or branches of a tree on A’s land
project into or over B’s land that is a nuisance not trespass.

In Lemmon v Webb

The roots of a tree on the defendants land get engrossed on the plaintiffs land.

Held: The act was not direct hence the defendant was not liable for trespass.

In Mann v Saulnier the defendant fenced his land properly. The fence eventually leaned
onto the plaintiffs land. The plaintiff sued for trespass.

Held: The act was not direct but consequential hence the defendant was not liable.

In Gregory v Piper
The defendant put rubbish near the plaintiffs wall. The rubbish rolled into the plaintiffs
land.

Held: The defendant was liable for trespass.

In South Port Corp v Esso Petroleum Co

 A ship belonging to the defendant co came to harbour. They dropped some fuel oil onto the
water to lighten the weight of the ship. The oil drifted to the shore belonging to the plaintiff.
The plaintiff sued for trespass.

Held: The act was not direct but consequential hence no liability for trespass.

Trespass ab initio

If a person enters land by authorization but once inside the land he does an act contrary to
the authority he commits trespass ab initio. There must be a positive act of misfeasance.

The six carpenters case

Six carpenters entered into a restaurant – ate, drunk and refused to pay. The owner of the
restaurant sued them for trespass ab initio.

Held this was a negative act of omission (non feasance) hence the carpenters were not liable
for trespass ab initio

Continuing trespass

The plaintiff can sue day by day. The defendant pays damages for each day. There can also
be the remedy of injunction.

Trespass to goods (chattels)

It is the intentional or negligent interference with a chattel in the possession of the plaintiff. The
interference must be direct. This tort protects several interests.

The plaintiffs interest in the retention of possession of his chattels.

His interest in the physical condition of his chattel
His interest in the inviolability of his chattel ie protection against intermeddling

Forms of trespass to goods.

Trespass to goods assumes various forms. Examples are

Taking a chattel out of the possession of another – Brewer v Dew (1843) in M & W 625

Moving a chattel from one place to another – Kirk v Gregory (1876) 1 EX D 55

Bringing ones person into contact with another chattel – Fouldes v Willoughby (1841) M & W
040

Directing a missile at someone’s chattel – Hamps v Darby (1948) 2 K B 311

Requirements

The act must be direct

There cannot be trespass to goods if interference is indirect. In Hartley v Moxham – 1842 – it
was held that to lock the room in which the plaintiff has his goods is not a trespass to the
goods

The act must be intentional or negligent

There is no liability where the trespass is neither intentional nor negligent.

In National Coal Board v Evans J E & Co Ltd (1951) 2 K B 861

 The court of appeal held that a contractor whose servant while excavating damaged the cable
of the plaintiff and whose act was not liable in trespass to goods.

The court stated – Cohen L J

‘He willed the operation of the machine which was excavating the earth but he neither desired
nor ought to have foreseen that damage to the cable which constituted the tortuous invasion
of the plaintiffs interest would occur – his act therefore was neither intentional nor negligent.

But if the defendant intended to interfere his trespass is intentional even though he did not
know that his act amounted to trespass. If for example he believed that the goods interfered
with were his own.

The plaintiff must be in possession of the goods at the time of interference

Possession connotes the power (factum) of exercising physical control and the intention to
exercise such control on his own behalf. Whether or not the plaintiff is the owner is
immaterial, provided he has possession. Thus in a simple bailment determinable at will the
bailor does not lose possession and can sue any wrongdoer for trespass. The bailee though
not the owner of the goods has sufficient possession and can also sue for trespass. But apart
from simple bailment determinable at will a bailer does not have possession of the chattels
and therefore cannot ordinarily sue in trespass for an act done to the goods balled. Possession
may either be actual or constructive trustees are in constructive. Trustees are in constructive
possession of chattels in the hands on the beneficiary on the basis that they share possession
with them trustees can sue for trespass to chattels in actual possession of a beneficiary.

In White v Morris (1852) 11 C B 1015 it was held that where goods were assigned as security
for a loan upon trust to permit the assignor to remain in possession until default in payment,
the assignee could sue in trespass while the goods were still in the assignor’s possession.

In Johnson v Diprose (1873) 1 512 R P 515 Lord Esher said ‘’the plaintiff in an action of
trespass must at the time of the trespass have the present possession of the goods either actual
or constructive, or a legal right to the immediate possession.

The rule in Wilkinson v Downtown (intentional physical harm to another person or damage to his
property other than trespass to the person or property)

Involves as situation where physical harm is inflicted by indirect means. This falls short of
trespass because of the requirement in all terms of trespass that ‘the act must be direct’ but there
may be liability under the so called ‘rule v downtown’

In Wilkinson v Downtown (1897) 2 QB 57

A by way of a practical joke, falsely told the plaintiff a married woman that her husband had met
with an accident whereby both his legs were broken. She believed this and was so violently upset
by the consequent nervous shock that she had a serious illness. A was held liable. Some attempt
was made by counsel to base the claim on deceit as a tort but the learned judge indicated that this
would have been an extension of that tort presumably because it is necessary that in deceit, the
injured party should have been intended to act upon the false statement and should have acted
upon it and here the plaintiff could scarcely be said to have acted in any way by falling ill.
 Wright J preferred the following ground;

‘The defendant has …. wilfully done an act calculated to cause harm to the plaintiff – that is to say
to infringe her legal right to personal safety, and has in fact thereby caused physical harm to her.
That proposition without more appears to me state a good cause of action there being no
justification alleged for the act’

Thus a person can recover under this rule for physical harm done. This however cannot be placed
under any specific tort. This principle is not limited to harm arising from a statement. It can also
arise from an act e.g. where the defendant scares the plaintiff into nervous shock by dressing up as
a ghost.

In Blackeley v Shortal’s Estate (1945) 20 N W 28

The defendant was held liable under this rule when he cut his throat in the plaintiff’s kitchen
scaring her into nervous shock. The principle also extents to damage to property for instance if A
suddenly shouts at a child who is descending a narrow staircase, intending the child to fall, A is
liable if the child falls and breaks its neck. A is also liable for the child’s clothing damaged in the
all although this would not amount the trespass to goods or person because there is no ‘direct’
injury. The principle would also extent to intentional infection of another person with disease.

Defences to trespass

License
A license has been defined as that consent, which without passing any interest in the property
to which it relates, merely prevents the act for which consent is given from being wrongful. A
man is not a trespasser if he is on the land or premises with permission express or implied of
the possessor.

A bare license i.e. one granted otherwise than for valuable consideration may be revoked at
any time and thus once revoked the licensee becomes a trespasser but he must be allowed a
reasonable time in which to leave and to remove his goods. Some contractual licenses on the
other hand are irrevocable because revocation in breach of contract would be prevented by the
grant of an equitable remedy to the licensee. A license coupled with an interest is irrevocable
because although the license itself – the bare permission to enter is only a right in personam it
confers a right in rem to something when you have entered.

In B Thomas v Sorrel (1672) Vaughan 330 at 351 Vaughan C J stated ‘a license to hunt a
man’s park and carry away the deer killed, to cut down a tree in a man’s ground and carry it
away the next day; are licenses as to the acts of hunting and cutting down the tree but as to the
carrying away of the deer killed and the tree cut down they are grants.

Thus until the tree or deer is carried away the license is irrevocable. Once a license has been
executed it cannot be revoked in the sense that the licensee can be compelled to undo what he
has lawfully done.

In Leggins v Inge (1831) 682 where an oral license had been given to lower a riverbank and
make a weir above the licensors mill it was held that the licensor could not sue the licensee for
continuing existence of the weir which the licensee had erected.

Justification by law
Acts which would otherwise be trespasses whether to land goods or the person are frequently
 prevented from being so by existence of some justification provided by the law. For example

A landlord commits no trespass if he distrains for rent.

In cases where officers of the law are authorized to enter land to take goods or to arrest or
restrain a person, no trespass is committed.

A bailiff who enters private premises on civil process eg to seize property in execution
commits no trespass provided that he does not gain entry by breaking in.

A private person may in certain circumstances arrest a criminal and I t is no trespass if he

breaks into a house of another person in order to prevent him from murdering his wife or
from committing other serious offences.

Self defence
Use reasonable force I defence of ones person is a defence to trespass to person. See Cockcroft
v Smith (1705) Sald 642 – discussed in general defences

What is reasonable force’ is a question of fact in each case.

Defence to the person of another

A servant may justify battery in defence of his master and a master and a master may lawfully
strike someone in defence of his servant. A wife may defend his husband and vice versa and
a man may defend any member of his family without committing trespass. The question
always is ‘was it reasonable for the defendant to protect the other person in this way’

The relevant factors are

a. Reasonableness in all the circumstances.

b. Relationship between the defendant and the person whom he defended eg one may use
greater force in defence of a spouse than of a stranger.

Defence of ones property

One may use reasonable force to defend land or chattels in ones possession against any person
threatening to commit or committing a trespass to the property. The defendant must have
such possession as would enable him to sue the plaintiff in trespass thus in Holmes v Bagge
(1853) it was held that a captain of a cricket club who removed the plaintiff from the field
would not plead that he had ejected a trespasser because the captain had to possession of the
field.

As with defence to person the defendant may use reasonable force and what is reasonable
force depends on the facts.

In Tullay v Reed (1823) 1 C and P 6 Park J Stated ‘if a person enters another’s house with
force and violence, the owner of the house may justify turning him out, using n more force
than is necessary without a previous request to depart; but if the person enters quietly the
other party cannot justify turning him out, without a previous request to depart.

As the law does not value interests in property quite so highly as those in the person the use
of force in defence of property is harder to justify that in the ease of self defence. Less force it
at all must be used in the former.
 Necessity
One may lawfully protect one’s person and property against threat or harm even though the
consequence is that an innocent person suffers a loss e.g. pulling down a burning house to
prevent spread of fire to the premises.

See discussion in general defences.

Abatement of nuisance
It is a defence to trespass to land that the act was done to end a nuisance to the defendant for
which the plaintiff was responsible. In

Lemmon vs Webb (1895) A C 1

The House of Lords held that an occupier could lawfully remove those branches of his
neighbours tree which projected above his own land and interfered with the growth of his
own trees. Similarly he may remove an obstruction to his right f light or to the flow of a
natural stream.

In abatement of the nuisance unnecessary damage must not be done. Where there are two
ways of abating a nuisance the less mischievous is to be followed unless it would inflict some
wrong on an innocent third party or the public. Previous notice should be given where
necessary notice need not precede the abatement if no entry on the land of the plaintiff is
made or if the matter is so urgent that it is reasonable for the defendant to enter without
notice. Notice is however required where the plaintiff has not himself created the nuisance on
his land but derives the title to the land from the creator.

CONVERSION

Conversion may be defined as an intentional dealing with a chattel, which is seriously inconsistent with
the possession or right to immediate possession of another person. In the words conversion is
committed when one deals with the goods of another person in a manner that constitutes an
unjustifiable denial of that person rights in the goods, which are inconsistent with the other persons
rights. The tort protects the plaintiff’s rights in the dominion and control of his goods. The tort may be
committed by wrongfully taking possession of the plaintiff’s goods destroying them disposing of them
or simply refusing to give them up when demanded.

A. Interest of the plaintiff

In order for interference or dealing to amount to conversion the plaintiff must either have;
Ownership and possession of the goods
Possession of the gods
A right to the immediate possession of the goods, but without either ownership or actual
possession of them

Examples of right to possess

A servant in custody of the masters gods has not possession of them for possession is
constructively in the master but if the master makes the servants a bailee of the goods so as to rest
him with exclusive possession then the master has possession and the master has only the right to
possess.

Categories of interest in goods

(i) Bailment
A bailee of goods can sue third parties in conversion. If the bailment is at will then bailor may
 also sue because he is then deemed to have an immediate right to possession. If the bailment
is for a fixed term, the bailor cannot sue for conversion during that bailment since he has no
immediate right to possession.

In the Winkfield (1902) p 42

The postmaster general as the bailee was able to recover the full value of mails lost through
the wrongdoing of the defendant even though the bailee was not liable for the loss.

A bailment which originally gave the bailor no immediate right to possess may become a
bailment at will.

In Manders v Williams (1849) 4 exch. 339

The plaintiff brewer supplied porter casks to a publican on condition that he was to return
empty casks within six months. A sheriff seized within six months of their being supplied
some empty casks in execution of a debt of the publican.

Held: The sheriff was liable to the plaintiff bailer because once the casks were empty the effect
of the contract was to make the publican a bailee at will whereupon the plaintiff was entitled
to immediate possession.

Similarly, if a bailee in a fixed term bailment does a wrongful act which may be deemed to
terminate the bailment the bailor may sue. Sale of the chattel by the bailee will ordinarily
terminate the bailment and the bailor can then sue either the bailee or the third party –
purchaser- for conversion.

(ii) Lien and pledge

The holder of alien too may sue in conversion but if he wrongfully parts with the possession
of the goods he loses his lien and his act is a conversion which entitles the owner to sue him.
A pledge however confers something more than the personal right of retention given by a lien
– for there is in addition a power to sell it in default of payment on the agreed date.

In Donald v Suckling (1866) 1 585

It was held that a re-pledge by the pledgee did not end the pledge and the original pledgor
could not sue the second pledgee without tendering the sum owing. Thus until the pledgor
tenders the sum owing he cannot sue for conversion because until then he has no immediate
right to possession. The pledge can sue for conversion since he has actual possession of
goods.
(iii) Sale
The right to sue for conversion depends on the terms of the contract of sale.

In Blomax-v- Sanders(1825) 4 BDC 941

It was held that, where goods were sold on credit, the buyer could see the seller in conversion
if he wrongfully sold them to a third party.

It was further held that in absence of credit terms the buyer although he may have the
property in the goods has no right to immediate possession until he pays the price.

In Wood v Bell (1856) E & B 772

A was building a ship for B and before its completion A’s assignees in bankruptcy seized it.

Held: That supervision by B of the construction and the punching of his name on the keel
evidenced the intention of the parties to pass the property to B as the work progressed so that
B could sue the assignees in conversion.

In the above case B had the immediate right to possession.

(iv) Licensee
Sometimes a licensee may be able to sue in conversion.

In Northam v Bowden (1855) 11 EXCH 70

The plaintiff had a licence to prospect certain land for tin. The defendant, without permission
carted away some f the soil on this land.

Held per Martin B

‘If the plaintiff had a right to the gravel and soil for the purposes of getting any mineral that
could be found in it he had such possession of the whole as entitled him to maintain an action
for its conversion against a wrongdoers.’

(v) Finder
In classic case of Armory v Delamirie
A chimney sweeper’s boy found a jewel and handed it to an apprentice of a goldsmith to be
valued. The goldsmith declined to return the jewel. The court finding for the boy against the
blacksmith held ‘that the finder has such a property as will enable him to keep it against all
but the rightful owner’

According to this maxim which restates the law on the point the finder if he appropriates the
chattel not only commits the tort of conversion but is also guilty of the crime of theft unless he
appropriates the chattel in the belief that the owner cannot be found by taking reasonable
steps. It follows that the occupier of land on which a chattel is found may in sometimes have
superior title to that of the finder. This includes cases where

The finder is a trespasser on the land

The property is attached to the land as in South Staffordshire water co v Shaaiman (1896) 2
QB 44

The plaintiff’s owners of land covered by a pool employed the defendant to clean out the pool.
His workmen found two gold rings in the mud at the bottom of the pool.

Held The plaintiffs were entitled to the rings.

Lord Russec C J stated ‘the possession of land carries with it in general by our law possession
of everything which is attached to r under that land and in the absence of a better title
elsewhere the right to possess it also’

The difficulty however arises where chattels are found on the land but are not attached to it.

Bridges v Hawkesworth (1856) 21 L J QB 75

A finder of a packet of bank notes lying on the floor of the public park of a shop was held
entitled to them as against the owner of the shop.

This authority was approved 95 years later in Hanna v Peel (1945) DK B 509:
A soldier billeted in a house found a breech loose in crevice on top of a window frame and
was held to be entitled to it. Birket J added that on the authority of Bridges v Hawkersworth
‘a man does not necessarily possess a thing which is lying unattached on the surface of his
land even though the thing is not possessed by someone else’.

It therefore seems best to state that whether or not the owner of land possesses things found
on the land depends on whether he intents and he has power to exercise physical control of
 them. If they are under or attached to the land this is presumed. If however they are
unattached to the land the nature of the chattel the extent of public access to the land whether
the owner occupies the land and other such factors will be considered in deciding whether or
not the owner of the land has the necessary animus and factum.

Conclusion
As regards the interest of the plaintiff to the goods for purposes of maintaining an action for
conversion the law in this respect favours possession at the expense of ownership and thus
ownership of chattels/goods must either be coupled with actual possession of the goods or a
right to the immediate possession of the goods.

B. The subject matter of conversion

Any chattel can be the subject matter of conversion including money identifiable in specie i.e.
money in a bag.

In Taylor v Plumer (1815) M & S 562

Where the defendant had been stealing the plaintiff’s goods from a warehouse over the years and
the plaintiff could not particularize beyond giving their total value the court held that an action lay
in conversion.

Although cheques are of value only as chooses in action, the courts have satisfied the demands of
commercial convenience by allowing the full value represented by them to be recovered in actions
for conversion.

So where a banker has not handled actual cash or notes but has merely made appropriate entries
by way of credit or debit balances the court will treat the conversion as being of chattel i.e. of the
piece of paper the cheque under which the money was transferred and the value of the chattel
converted as being the sum represented by the cheque. This doctrine is applicable to all negotiable
instruments. But this is not the limit of the doctrine.

In Vavins Junr and Sims v London and South Western Bank (1900) I Q B 270
All the judges in the court of appeal thought that the full value of a non-negotiable instrument
evidencing a debt could be recovered in action for conversion

C. The state of mind of the defendant

Ashby –v- Tolhurst
A third party had driven away the plaintiff’s car, which he had left in the car park of the defendants. The
car park attendant told the plaintiff that he had ‘given’ the car to the third party. In a suit against the
defendants (owner of the car park) for conversion.

Held:- The attendants act did not amount to conversion by the defendants.
If the defendant intends some dealing with the chatter, which in fact interferes with the control of the
plaintiff, that act will be conversion, though the doer may not have known of or intended to challenge the
property of the true owner.

i.e. so long as he intended the conduct that led to challenge the title.
Mistake and good faith are irrelevant.

Fowler –v- Hollins (1827) L.R 7QB 616 at p. 639 per CHEASBY, B.

“The Liability…… is founded upon what has been regarded as a salutary rule for the protection of
property, namely, that persons deal with the property in chatters or exercise acts of ownership
over them at their own peril.

D. What constitutes conversion (acts of conversion)

Taking possession of another’s goods
Taking possession of another’s goods is conversion as well as trespass, but there is no conversion
where the interference is merely temporary and is unaccompanied by any intention to exercise any
rights over the goods.

To steal or to seize under legal process without justification is conversion. Merely to remove goods
from one place to another is not conversion.

In Bushel –v- Miller (1718) 1 stra. 128

Where a porter moved goods of another in order to reach his own, and negligently failed to replace
them, he was held not liable in conversion for their subsequent loss.

Where A, without lawful authority transfers B’s goods to C, the mere voluntary reception of them by
C is in general conversion, however innocent C may be.

Involuntary reception of goods is however not conversion eg in a case of an innocent person into
whose pocket a thief, in order to escape detection, inserts a purse which he has stolen from a third
person. Even where the receiver knows that the thing belongs to another person, he incurs no liability
by having it thrust upon him.

Destroying or altering
To destroy a chatter internationally is to convert it. A change of identity not
amounting to destruction is however not enough, for example, to draw out part of a vessel of liquor and
fill it up with water is conversion.

(Richardson –v- Atkinson (1723) 1 stra 576) but to merely cut a log of wood into two is not
conversion. (Simpson –v- Lillystone (1853) 8 exch.431)

If the chatter is used for a purpose which eliminates its utility as a chatter in its original
form eg to make wine from grapes or a dress from a roll of cloth, is conversion.

In Hollins –v- Fowler (1875) L.R 7 H.L 757 al p. 768

BlackBurn J. stated ‘That a miller innocently grinding another’s com commits conversion.

Using
To use goods of another as your own is ordinarily to convert them.

In Lancashire –v- MaeNicoll (1918) 88 L.J K.B 601

It was held that it was conversion for a person, to whom carbolic acid drums were
delivered by mistake, to deal with them as his own by pouring the contents into his tank.
In Mulgrave –vs- Ogden (1591) cro Eliz 219
It was said:
“no law compelleth him that finds a thing to keep it safely; as if a man finds a garment,
and suffers it to be moth-eaten; or if one finds a horse, and giveth it no sustenance: but if a man finds a
thing and useth it; he is answerable for it in conversion: so if he misuseth it, as if one finds a paper, and
puts it into the water, etc, but for negligent keeping no law punisheth him”.

Abusing possession
 Abuse of possession that the defendant already has may take many forms, such as sale
accompanied by delivery of the plaintiff’s goods or their documents of title to another, pawning them or
otherwise disposing them.

Whether or not unauthorised use by a bailee amounts to conversion depends on the

degree of departure from the terms of the bailment. E.g. use of a borrowed car or a car the subject of a
bailment for the transport of uncustomed watches is a conversion of the car for if such conduct is
discovered it leads to the forfeiture of the car under the English customs and Excise Act 1952 and its
subsequent loss to the owner.

In Moorgate Mercantile Co Ltd –vs- Finch (1962) 1 Q.B 701

The court of Appeal held that it was at least the probable result of such use of the car that the car
would be forfeited and therefore that the defendant must be taken to have intended this result even
though, no doubt, he hoped that it would not happen.

A mere bargain and sale or the attempted disposition of goods by a person without a transfer of
possession i.e. delivery, on the other hand, is not conversion; the act is void and does not change the
property or the possession.

Refusal to Surrender goods on demand

A refusal to surrender a chatter upon lawful and reasonable demand is a conversion.
This usually covers the situation where the possession of the chatter by the defendant was originally
lawful.

Proof of demand by the plaintiff for the return of the goods met by a refusal of the defendant is one
of the common ways of producing evidence of conversion for it tends to show that the defendants
detention of them is wrongful. The refusal must, however, be unconditional or, if it is conditional, the
condition must be an unreasonable one.

In Howard –v- B.R.B (1980) 1 WLR 1875

It was held that the defendants’ refusal to allow the plaintiffs to enter their premises to collect their
goods which belonged to them could not be justified by their fear of intensified industrial action.

Reasonableness is a question of fact and many factors may be relevant e.g. the time of the
demand, the expense and inconvenience of immediate compliance, etc.

E. Conversion as between co-owners

 As between co-owners, there is unity of possession. Each is entitled to possession and use of the
chatter, and the mere enjoyment in one way or another by a co-owner cannot amount to conversion as
against the other.
If a co-owner of a chatter makes lawful use of it even if he changes its form, this is not a conversion
actionable by another co-owner.

In Fennings –v- Grenville (1808) 1 Taunt. 42

The defendant cut up a whale, and converted its fat and blubber into oil. It was held that his co-owner
could not succeed in an action for conversion as the use made by the defendant was a proper one.

No doubt the co-owner could have sued for an account of profits.

Where a co-owner deprives the other of the use of a chatter by selsling it or completely destroying it,
this is conversion.

Putting a chatter into legitimate use is not conversion.

Jacobs –v- Seward (1873) L.R 5 H.L 464

The House of Lords held that it was not conversion for a tenant in common of a field to make hay from
the grass on it.

Per Lord HAtherley

“As long as the tenant in common is confining his use of that property to its legitimate purpose
trover will not lie against him”.

F. Measure of damages
The plaintiff in conversion is entitled to be compensated to the extent of the value of the goods which he
has been deprived.

Where goods are of a kind which can be readily bought in the market , the market value will be the
appropriate measure of damages; otherwise the replacement value in a comparable state, or the original cost
minus depreciation will be the standard.

Where a negotiable instrument or other document ordinarily representing a chose in action is converted,
the value, which the document represents, and not merely its value as a piece of paper, is the basis of the
quantum of damages.

The time at which the value of the goods is to be determined is ordinarily, the date of conversion. Once
a claim for conversion has accrued to the plaintiff it is not open to him to delay the instituting of his claim –
The duty to mitigate damages operates.

If goods decrease in value between the date of the conversion and the date of judgement the plaintiff
may still recover the value at the date of conversion.

In Sollaway v Mchaughlin (1938) A C 24

The defendant broker fraudulently and contrary to instructors sold shares of the plaintiff deposited with
him. By the time of the trial the defendants had bought in replacements at an equivalent number of shares at
a greatly reduced market value. Although the net result was to put the plaintiff in a better position than if his
instructions had been obeyed he was held entitled to recover the difference between the value of the shares
at the time of the conversion and the value of the shares since bought in replacement.

Nevertheless, the market value at conversion will not necessarily mark the top limit of damages
recoverable in conversion in the following instances.

(a) Where the market value of the goods rises between the date of conversion and the date of trial. If the act
 of conversion s sale and the value of the goods increase by the time judgement is given the plaintiff can
recover the higher value.

Greening v Wilkinson (1825) I C & P 625

The defendant refused to hand over to the plaintiff the plaintiff’s warrants for cotton and
relying on this demand and refusal the plaintiff sued in conversion. At the date of refusal the warrants
were worth 6d per 1b and at trial they were worth 10 1/2d per 1b.

Damages were awarded on the basis of 10 1/2d per 1b.

As per Abboc C J
The jury may in awarding damages may give the value at the time of conversion or at any subsequent
time at their discretion because the plaintiff might have had a good opportunity of selling the goods if
they had not been detained.

(b) If the defendant converts the plaintiffs goods and he then increases its value the plaintiff cannot
ordinarily recover that increased valued

In Reds v Fairbanks (1853) 13 C B 692

Where the defendant converted a partially built ship which he then completed at his own
expense the courts view was that the plaintiff was entitled to recover the market value of the completed
ship less the expense incurred by the defendant in completing it.

(c) If the plaintiff incurs pecuniary loss as a direct consequence of the conversion he may recover this loss
as a special damage in addition to the market value of the chattel.

In Bodley v Reynolds (1846) 2 Q B 779

A workman deprived of his tools recovered lost wages in addition to the value of the tools.

In Davis v Oswell (1837) 7 C & P 804 the court held that the owner of a converted pony could claim
the cost of hiring another.

(d) The effect as between the parties of judgment for damages in conversion is to transfer the title in the
goods to the defendant. It follows that the court will not award damages for loss of use as well as the
value of the chattel where the effect would be to doubly compensate the plaintiff e.g. where the plaintiff
buys or ought to have bought a replacement in order to mitigate his loss.

In Ressimms Ex paire Trestee (1934) ch 1 it was held that where the defendant wrongfully
detained goods and later sold them the plaintiff could recover in addition to the value of the goods the
loss of use from the date of unlawful detention until sale and indeed until the plaintiff had a reasonable
opportunity to buy a replacement after learning of that sale but not for loss of use until trial.

The plaintiff is under a duty to mitigate his losses arising from conversion of his goods.

G. Defences to conversion
The exercise of a right of distress
A person who takes and even sells the goods of another in lawful exercise of a right of
distress is not liable in action for conversion of the goods.

Mistake
 Mistake does not generally provide a defence for liability in conversion is strict.

In Martani & Co Ltd v Midland Bank Ltd (1968) 1 W L R 956 at 971 per Diplock L J
‘At common law one’s duty to one’s neighbour who is the owner of any goods is to refrain
from doing any voluntary act in relation to his goods which is a usurpation of his proprietary or
possessor rights in them. Subject to some exception it matters not that the doer of the act of usurpation
did not know and could not by the exercise of any reasonable care have know and could not by the
exercise of any reasonable care have known of his neighbours interest in the goods. This duty is
absolute he acts at his peril.

There are however exceptions to the rule that innocent mistake is no defence to the tort
of conversion.
This exceptions consist of what is known as exceptions to the rule nemo dat quod non
habitat

Whereby a bonafide purchaser of goods from A commits no conversion but actually obtains a
good title tot hem even though the goods belonged to B and B never intended to allow A to sell them.
B’s remedy is against A alone. The principle exceptions under this rule are the subject of a large and
detailed topic in sale of goods law but are briefly as follows.
a. Sale in market overt
b. Estoppel by representation or by negligence
c. Sale under avoidable title
d. Disposition in the ordinary course of business by a mercantile agent in possession of the goods or
documents of title with the owners consent
e. Second sale by seller in possession
f. Sale by buyer in possession

Private sale of a chattel subject to a hire purchase agreement

Retaking of goods
This is a species of self-help. If A’s goods are wrongfully in B’s possession or control there is
no need for A to go to the expense of litigation to recover them. He can retake them peace by if he can
and in any event with no more force than is commensurate with the violence of B’s resistance. Indeed
retaking may be his only opportunity of doing himself justice for delay may mean destruction or
conveying away of the goods by B who may be quite incapable of paying the value. A must use no
more force than is necessary and as this necessity varies with the facts of each case. Retaking is a
remedy as well as a defence. If A takes B’s goods B can retake them from A as a remedy. If A
unlawfully although mistakenly obtained the goods from C, B can plead the defence of retaking in an
action.

For conversion brought against him by C.

For the defence to succeed, C must have obtained the goods outside the exceptions under mistake
above i.e. He must not have acquired a good title to the goods.
The right to retake goods thus has qualifications.

Qualification

(i) With respect to persons

A can retake goods not only from B, the original tortfeasor but also from a third party subject
to the exceptions which arise where that third person has acquired a good title even against A.
In such cases, A having lost the right to the property, has got nothing which he can retake.

(ii) With respect to place

The person entitled to goods may enter and take them from the land of the first taker if the
taker himself wrongfully put them there. But it is by no means certain what the law is when
 the goods are on the premises of a third party who has committed no tort with respect to them.
Authorities have been divided on this point.

It is not clear under what circumstances the owner of goods can retake them from a third party
without committing a trespass. One thing is however clear; The retaker, before he attempts to retake,
must, if required to do so, explain to the occupier of the land, or the person in possession of the goods
the facts upon which his proposed action is based. A mere allegation that the goods are his, without
any attempt to show how they came on the premises will not do, for, according to Tindal C.J. in
Anthony –v- Haney (1832 Bing 186, at 192

“to allow such a statement to be a justification for entering the soil of another, would be opening too
wide a door to parties to attempt righting themselves without resorting to law, and would necessarily
tend to be a breach of the peace.”

DEFAMATION

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

Defamation is sometimes defined simply as the publication of a statement which tends to bring a person “into
hatred, contempt or ridicule; but this is not quite exact, for a statement may possibly be defamatory even if it
does not excite in reasonable people feelings quite so strong as hatred, contempt or ridicule and the definition is
defective in omitting any reference to the alternative of “tending to shun or avoid him”.
This addition is necessary, for falsely imputing insolvency or insanity to a man is unquestionably defamation,
although, far from tending to excite hatred, contempt or ridicule, it would rouse only pity and sympathy in the
minds of reasonable people, who would nevertheless be inclined to shun his society.

The Lort of defamation is of 2 kinds;

Libel
Slander

In Libel - The defamatory statement is made in some permanent form such as writing, printing, pictures.
In Slander - The statement is made in spoken words or in some other transient form whether visible or audible
such as gestures or inarticulate but significant sounds.

In Youssoupoff –v- M.G.M. Pictures Ltd (1934) so T.L.K. & 81

The Court of Appeal held that defamatory matter in a “talking” film was a Libel.

Differences between Slander and Libel

It has been stated that Slander is addressed to the ear while Libel is addressed to the eye.. This distinction is
however not accurate because Slander can as well be addressed to the eye as in the case of defamatory gestures
whereas Libel can be addressed to the ear as in the above case of Youssoupoff –v- Man Pictured where Slesser
L.J. stated:

“There can be no doubt that so far as the photographic part of the exhibition is concerned, that is a permanent
matter to be seen by the eye, and is proper subject of an action eye, and is the proper subject of an action for
Libel”

Thus the `talking` film, though generally addressed to the ear, was in permanent form thus making it a Libel.

There are however clear differences between Libel & Slander

Libel is defamation in permanent form whereas Slander is defamation in transient form.
Libel is not merely actionable as a tort but is also a criminal offence whereas Slander is a civil wrong only
All cases of Libel are actionable per se but Slander is only actionable on prove of actual damage with 4
exceptions under the Defamation Act, which are actionable per se

The exceptions of Slander actionable per se

Imputation of a criminal offence

 Where the defendant makes a statement, which imputes a criminal offence punishable with imprisonment
under the penal code, then such Slander will be actionable per se.

There must be a direct imputation of the offence and not merely a suspicion of it and the offence must be
punishable by imprisonment in the first instance.

If the Slander goes into details of the offence, it is not actionable per se if the details are inconsistent with
one another.

In Jackson –v- Adams (1835) 2 Bing N.C. 402

The defendant said to the plaintiff a churchwarden, “who stole the parish bell ropes, you scamping
rascal.” As the possession of the ropes was vested in the Churchwarden theft of them by him was
impossible. This slander was thus not actionable per se.

Imputation of a contagious or infectious disease.

This is actionable per se as it is likely to make other people to shun associating with the plaintiff.

This exception always includes sexually transmitted diseases and in olden times the diseases of plague
and leprosy.

Imputation of unfitness, dishonesty or incompetence in any office, profession, calling,

trade or Business held or carried on by the plaintiff at the time when the Slander was
published.

This is the most important exception under the Defamation Act, 1952 (English) S. 2 provides (similar to
S. 3 of 1972, Defamation/Act, chapter 36, Laws of Kenya.)

“In an action for Slander in respect of words calculated to disparage the plaintiff in any office, profession,
calling, trade or business held or carried on by him at the time of publication, it shall not be necessary to
allege or prove special damage whether or not the words are spoken of the plaintiff in the way of his
office, profession, calling, trade or business.

It follows that any words spoken of a man which are reasonably likely to injure him in his office,
profession, calling, trade or business will be actionable per se. It matters not how humble the office may
be, so long as it is lawful.

Imputation of unchastity or adultery of any woman or girl

Words spoken and published which impute unchastity or adultery to any woman or girl, shall not require
prove of special damage to render them actionable.

In Kerr –v- Kennedy (1942) 1 K.B. 409

The court was of the opinion that the term “unchastity” includes Lesbianism.

Essentials of defamation generally

Whether defamation consists of Libel or Slander the following requisites are common to both, and must be
proved by the plaintiff.
(i) The words must be defamatory
(ii) They must refer to the plaintiff
(iii) They must be maliciously published.

The words must be defamatory

A defamatory statement is one which has a tendency to injure the reputation of the person to which it
refers.

The statement is judged by the standards of the ordinary right thinking members of the society and the test
is an objective one. It is no defence to say that the statement was not intended to be defamatory, a
tendency to injure or lower the reputation of the plaintiff is enough and a statement may be defamatory
although no one to whom it is published believes it to be true.

Abuse – Mere insult or vulgar abuse does not amount to defamation.

The manner in which the words were spoken and the meaning attributed to them by the hearers is however
important in determining whether the words are defamatory or simply abusive.

In Penfold –v- West Cote (1806) 2 B & P (W.R.) 335

Where the defendant called out “why don’t you come out you blackguard, rascal, scoundrel, pen-fold, you
are a thief”, it was left to the jury to decide whether the general abusive words accompanying `thief`
reduced `thief` itself to a mere abuse. The jury gave a verdict that the term `you are a thief` was not a
mere abuse but was defamatory.

The speaker of words must thus take the risk of his hearers construing them as defamatory and not simply
abusive and the burden is upon him to show that a reasonable man would not have understood them as
defamatory.

Interpretation
In interpreting a defamatory statement, the meaning attached to it is not necessarily the meaning with
which the defendant published it but that which is or may be reasonably given by the person to whom it is
published.

The fact that the defendant did not intend to lower the reputation of the plaintiff is immaterial, so long as
the statement has a defamatory meaning to those whom he makes it. On the other hand, a defamatory
purpose will not render the defendant liable if the statement has not defamatory significance to those it is
published.

A statement is prima facie defamatory when its natural obvious and primary meaning is defamatory. Such
a statement is actionable unless its defamatory significance is explained away successfully. The burden of
such an explanation rests upon the defendant.

Innuendo - The words which the plaintiff complains may be defamatory in the light of facts and
circumstances known to persons to whom they were published.

An innuendo may thus make words, which are not otherwise defamatory in the natural and ordinary
meaning, to be defamatory. The burden is on the plaintiff to prove the meaning, which he understood by
persons having knowledge of particular facts.

In Tolley –v- Fry and Sons Ltd (1931) A.C. 333

The plaintiff a famous amateur golfer, was caricatured by the defendant, without his knowledge or
consent, in an advertisement of their chocolate bar which depicted him with a packet of it protruding from
his pocket, the excellence of which, was likened in some doggerel verse, to the excellence of the
plaintiff`s drive. The plaintiff had let his portrait exhibited for advertisement, that he had thus prostituted
his reputation as a famous amateur golfer.

Held: - that the caricature, as explained by the evidence, was capable of being thus constructed; for golfers
testified that any amateur golfer who assented to such advertisement may be called upon to resign his membership
of any reputable club.

Knowledge of the innuendo by the defendant is immaterial and the defendant is nevertheless liable for a
statement he believes to be innocent but is in fact defamatory by reason of facts unknown to him but
known to the persons to whom he makes it.

In Cassidy –v- Dally Mirror Newspapers Ltd (1929) 21 K.B. 331

The defendants published in their newspaper a photograph of one Cassidy and Miss X together with the
words “Mr. Cassidy, the race-horse owner, and Miss X, whose engagement has been announced.”
Mrs Cassidy was, and was known among her acquaintances, as the lawful wife of Mr Cassidy although
she and Cassidy were not living together. The information on which the defendants based their statement
was derived from Cassidy alone and they made no effort to verify it from other sources Mrs Cassidy sued
for Libel, the innuendo being that Cassidy was not her husband but lived with her in immoral
cohabitation.

Held: - That the innuendo was established and that as the publication conveyed to reasonable persons an
aspersion on the plaintiff’s moral character, she was entitled to damages.

The words must refer to plaintiff

The defamatory statement must be shown to refer to the plaintiff. A court has power to dismiss an action on the ground that no
reasonable person could conclude that the plaintiff should be identified with the person mentioned in the statement complained of as
defamatory. If the plaintiff is mentioned by name, there is usually no difficult. It is never necessary however that the reference to
the plaintiff should be express. The reference may be latent and it is sufficient in such a case the statement was understood, even by
one person, to refer to the plaintiff, even though it remained hidden to all others.

The question is not whether the defendant intended to refer to the plaintiff but is whether any person to
whom the statement was published might reasonably think that the plaintiff was referred to in Hulton –v-
Jones (1910 J.A.C. 20)

A newspaper published a humorous account of a motor festival at Dieppe in which one Artemus Jones
displayed as a churchwarden at Peckham was accused of living with a mistress in France. The writer of
the article was ignorant of the existence of any person by the name as that of a fictitious character in the
article. However, there was in fact a barrister named Artemus Jones, who was not a church warden did
not live at Pekcham and had not taken part in the Dieppe festival. He sued for Libel. His friends swore
that they believed the article to refer to him.

Held: - That the newspaper was responsible for Libel.

On appeal to the House of Lords

The decision was unanimously affirmed by the House of Lords who held further that if reasonable people
would think the language to be defamatory of the plaintiff it was immaterial that the defendants did not
intend to defame him.

In Newstead –v- London Express Newspapers Ltd (1940) I K.B. 377

The Court of Appeal carried Hulton –v- Jones further in two dimensions. The held that;

(a) The principle applies where the statement truly relates to a real person A, and is mistakenly but
reasonably thought to refer to another real person B.
(b) Absence of negligence on the defendant`s part is relevant only in the sense that it may be
considered by the jury in determining whether reasonable people would regard the statement as
referring to the plaintiff; otherwise it is no defence

In Newsteads Case
The defendant published an account of a trial for bigamy of Harold Newstead a 30 year old comber well
barman but it was untrue of the plaintiff, Harold Newstead, aged about 30 years, who was a hairdresser in
Camberwell.

Held: The defendants were liable as reasonable persons would have understood the words to refer to
the plaintiff.

Defamation of a class
A problem arises where a defamatory statement refers to a class of people to which the plaintiff belongs.
The test is the same i.e. would a sensible ordinary person identify the plaintiff as the person defamed?

In Eastwood –v- Holmes (1858) 1 F & F 347 at 3349 Willes J stated

“If a man wrote that all lawyers were thieves, no particular lawyer could sue him unless there was
something to point to the particular individual.”

The question of whether an individual can sue in respect of words, which are directed against a group, or
body or class of persons generally was considered by the House of Lords
In Knuppfer –v- London Express Newspaper Ltd 1944 A.C. 116 and the law may be summarised as
follows: -

The question is whether the words are published “of the plaintiff” in the sense that he can be said t
be personally pointed at.

Normally where the defamatory statement is directed to a class of people no individual belonging
to the class is entitled to say that the words were spoken of him. Per Lord Porter,
“no doubt it is true to say that a class cannot be defamed as a class, nor can an individual be
defamed by a general reference to the class to which he belongs.”

Words which appear to apply to a class may be actionable if there is something in words, or the
circumstances under which they were published which indicates a particular plaintiff or plaintiffs.

If the reference is to a Limited class or group e.g. trustees, members of a firm, tenants of a
particular building, so that the words can be said to refer to each member, all will be able to sue

Whether there is any evidence on which the words can be regarded as capable of referring to the
plaintiff is a matter of law for the Judge. If there is such evidence then it is a question of fact
whether the words lead reasonable people who know the plaintiff to the conclusion that they do
refer to him.

In J`Anson –v- Stuart 9787) 1 7. R 748

A newspaper paragraph stated, “This diabolical character, like Polyphemus the man eater, has but one
eye, and is well known to all persons acquainted with the name of a certain noble circumnavigator.” It
was clear that the plaintiff was the person indicated on his giving proof that he had one eye and bore a
name similar to that of Anson, the famous admiral.

The words must be `maliciously` published

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

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

It is normally said that the words must be published maliciously but this is purely formal, and is usually
inserted in the plaintiff’s statement of claim for the purpose of inflating damages where there has been
spite or deliberateness

Express make in the sense of spite or ill motive will usually defeat the defences of fair comment and
qualified privilege.

Communication between spouses about a 3rd party is not publication. This is explained by the fiction of
unity between husband and wife. A communication by a third party to one spouse about the other is
however publication.

By dictating a defamatory letter to his secretary, an employer commits Slander. If the secretary reads it
back to him or hands over the typed copy, she is not making a fresh publication.

A statement not heard by the recipient because e.g. he is deaf or he does not understand the language is
not treated as having been published nor is a person liable if a 3 rd party on his own initiative hears or sees
the defamatory matter. However he will be liable for the statement which he intended a 3rd party to know
or should have foreseen might come to his attention.

In Huth –v- Huth (1915) 3 K.B 32

Opening a letter sent through by a butler out of curiosity and in breach of his duties was held not to
amount to publication by the defendant.
 However, per Lord Reading C.J. at P. 40
There would have been publication by the defendant if the letter, whether sealed or unsealed, had not been
marked “private” and had been opened and read by the plaintiff`s correspondence clerk in the course of
his duty.

A defendant should anticipate that a husband might open his wife`s letters and equally a letter addressed
to a businessman may be opened by a secretary and therefore the defendant will be responsible for the
resulting publication unless the letter was clearly marked “personal” or “private”

The burden of prove of publication is on the plaintiff but in many circumstances this burden is eased by
certain rebuttable presumptions of fact, e.g. An open postcard or a telegram message is deemed to have
been published to those who would, in the ordinary course of transmission, normally see it.
Spoken words are deemed to have been published to people within earshot

Repetition of a statement
One who respects a defamatory statement made by another person is liable for the repetition and this
constitutes a fresh publication even though the person and not know that the statement is defamatory.
However, the original maker of the statement is liable for such re-publication if he has authorised it or if it
seems reasonably foreseeable.

In Eglantine Inn Ltd. –v- Smith (1948) N.I 29.

The printers were held liable on this principle because they clearly envisaged the distribution of the
defamatory matter among the public and could, therefore, be deemed to have authorised it.

Every repetition is a fresh publication that gives rise to a fresh cause of action against each successive
publisher.

In Vizentally –v- Mudle`s select Library Ltd.

The owners of a circulating Library were held liable for allowing people to read some books which the
publisher had asked them to return as they might contain defamatory matter.

DEFENCES TO DEFAMATION

Unintentional Defamation
Under common Law, the fact that the maker of a statement was unaware of the circumstances making it
defamatory does not absolve him from liability

The Defamation Act seeks to redress this situation by enabling the defendant to make an `offer of amends`
for an innocent defamation

Under the Act, words shall be treated as innocently published in relation to another person if and only if: -
(a) The publisher did not intend to publish them of and concerning that other person, and did not know
of circumstances by virtue of which they might be understood to refer to him; or
(b) The words were not defamatory on the face of them, and the publisher did not know of
circumstances by virtue of which they might be understood to be defamatory of that person, in
either case, the publisher has exercised all necessary care in relation to the publication.

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

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

If the offer of amends is acceptable by the party aggrieved, and duly performed, no proceedings for
Libel or Slander may be taken or continued by that party making the offer in respect of the
publication in question.
 If the offer of amends is not accepted by the party aggrieved, then it is a defence in any proceedings
by him. For the Libel or Slander to prove that;
(a) The words were published innocently in relation to the plaintiff
(b) The offer was made as soon as it practicable after the defendant received notice that they
were or might be defamatory of the plaintiff; and
(c) The words were published without malice.

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

Consent and assumption of risk

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

In Cookson –v- Harewood (1932) 2 K.B 4

Scrulton L.J. said
“if you get a true statement and an authority to publish the true statement, it does not matter in the least
what people will understand it to mean.”

The defence of consent has been regarded as an instance of voluntary assumption of risk (volentinon fit
injuria). This defence was upheld in Chapman –v- Elsemele (discussed in gen. Defences) where the
plaintiff by being a member of the Jockey Club was deemed to have consented to publication of a report
in the Jockeys Journal.

Justification or truth
The plaintiff does not have to prove that the statement complained of was false. On the contrary the
burden is on the defendant to prove that the statement was true. Truth is a defence because the law will
not permit a person to recover damages in respect of an injury to a character, which he either does not
have or ought not to posses. The defendant must establish the truth of the precise charge that has been
made which is ultimately a matter of interpretation of the facts.

In Wakley –v- Cooke (1849) 4 exch. 511

The defendant called the plaintiff a “Libellous Journalist”. He proved that the plaintiff had been
found liable for Libel once. The court took the view that this words did not mean that the plaintiff
was held liable on one occasion but meant that the Journalist habitually libelled people. The
defence of truth accordingly failed.

The defendant must justify the statement by showing that it was substantially accurate. The standard of
proof of justification is the normal civil one of balance of probabilities, but as is other civil cases, the
seriousness of the defendant’s allegation may be taken into account in determining whether he has
discharged that burden.

The defence will not fail if the truth of several charges is not established provided that having regard of
the truth of the remaining charges, the charge not proved does not materially injure the plaintiffs
reputation.

In Alexander –v- North Eastern railway (1865) 6 B & S 340

The defendants published a statement that the plaintiff had been sentenced to a fine of 1 or 3 weeks
imprisonment. They justified this by proving that he had actually been sentenced to a fine of 1 or 2 weeds
imprisonment. The statement was held to be substantially true.

One difference between the defence of justification and the defences of fair comment and qualified
privilege is that even malice on the part of the defendants does not deprive him of the defence of
justification.
The defence of justification is a dangerous defence because if the defendant fails to prove the truth of the
statement he has made he may end up paying aggravated damages as insisting that a statement is true
without proving amounts to fresh publication hence fresh defamation.

In Broadway Approvals Ltd –v- Odhams press Ltd. (No.2) (1965) 1. W. L. R. 805, at P. 825 Per
Davis L. J. – A plea of justification should not, of course be made unless the defendant has evidence of
the truth of the statement

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

The requirements of this defence are as follows: -

(i) Public Interest

The matter commented on must be of public interest.

In London Artist Ltd –v- Litler (1969) 2 QB 375, at P.391, per Lord Denning M. R.
“Whenever a matter is such as to affect people at Large so that they may be legitimately
interested in or concerned at what is going on or what may happen to them or to others then it
is a matter of public interest on which everyone is entitled to make fair comments. The
reference to people at large should not be taken to suggest that if the statement complained of
refers to one person or a few persons it can never be of public interest.”
Matters of government, National and Local Management of public and religious institutions,
the conduct of foreign policy and even the behaviour of holders of public office are matters of
public interest.

(ii) The comment must an opinion on true facts

Fair comment is available only in respect of expressions of opinion. In fair comment it is not
necessary to prove the truth of the comment, but that the opinion was honestly held
The defence of fair comment only lies on facts which are proved to be true, and on statements
of fact not proved to be true but which were made on a privileged occasion.
The comment itself need not be true, though. It must be honestly made, but the facts upon
which the comment is made must be true unless they are privileged.
If the facts are untrue, the defendant will not succeed in fair comment merely by proving that
his comment is honestly made.

In Merivale –v- Carson (1887) 220. Q. B. D. 275

It was held that a defendant who implied that a play was adulterous could not rely on this as a
fair comment where the court found as a fact that adultery was not dealt with in the play.

Sometimes it is difficult to differentiate a statement of facts and a comment e.g. a statement

that X was drunk last night and his behaviour was disgraceful – such a statement of opinion. If
X`s behaviour after drinking was in fact disgraceful, then it is a statement of fact. If however,
the second statement is a statement of opinion, then it is the subject of a fair comment.
Every statement must be taken on its merits. The same words may be a statement of facts or
an opinion depending on the context. To say that “A is a disgrace to human nature” is an
allegation of fact. But to say, “A murdered his father and is therefore a disgrace to human
nature,” the latter words are plainly a comment on the former.

In Dakhyl –v- Labouchere (1908) 2 K. B. 325

The plaintiff described himself as “a quack of the rankest species.”

Was this a comment or an allegation of fact

It was held by the House of Lords that it was a comment.

The comment must be fair – The comment must be honest and not actuated by malice. For
 comment to be fair it must first of all be based upon true facts in existence when the comment
was made. One cannot invent untrue facts about another then comment about them. To this
however there is one necessary exception, namely, a fair comment may be based on an untrue
statement which is made by some person upon a privileged occasion e.g. a statement of a
witness in the course of judicial proceedings, and properly attributed to him. (NB. The
comment here should however be based on the untrue statement of another person, not the
person making the comment.)

In assessing fairness, it is important that the defendant honestly holds is opinion. It is not for
the court to substitute its own judgement as to what is fair. The test given by Lord Esher M. R.
in Merivale –v- Carson (1887) 20 Q. B. D. 275 at 281 was;
“Would any fair man, however prejudiced he may be, however exaggerated or obstinate his
views, have said that which this criticism said of the work which is criticised.”

Absence of Malice - The defence will be defeated by prove of malice, which here means `evil
motive` or `spite`

In Thomas –v- Bradbury, Agnew & Co Ltd. (1906) 2 K.B. 627

The court of appeal held that a book reviewer for punch magazine was hostilely
motivated against the plaintiffs` Books which was evident not only by the review he
wrote but also by his behaviour in the witness box. His behaviour displayed malice
which negated the plea of fair comment.

Privilege

There are two categories of privilege

Absolute privilege
Qualified privilege

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

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

The defence is available in the following cases;

Any statement made in the course of and with reference to Judicial proceedings by an judge, jury, party,
witness or advocate.

Fair and accurate report in any newspaper of proceedings heard before any court.

Any statement made in parliament by a member of parliament

Reports, papers, votes and proceedings published by the order and/or under the authority of the National
Assembly.

Communication made by one officer of state to another in the course of his official duty.

Communication between an advocate and his client in connection with litigation.

Communication between husband and wife.

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

The statement must be made honestly and without any indirect or improper motives. Qualified
privilege is thus an intermediate case between absolute privilege and absence of privilege.

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

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

(a) Statement made in the performance of a duty

A statement is conditionally privileged if this is made in the performance of any legal, social or
moral duty. Imposed upon the person making it.

The privilege is that of the publisher, the person to whom the statement is published needs no
privilege because he commits no tort. Never the less it is essential that the person to whom the
statement is made has a corresponding interest or duty to receive it. This is not to say that both
parties must have a duty or both an interest; one may have an interest and the others a duty.

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

A father or a near relative may warn a lady as to the character of the man whom she proposes
to marry (Todd-v- Hawkins)
In Watt-v- Longsdon (1930) I. K. B. 130

The defendant, a company director, informed the chairman of the board of directors of his
suspicion that the plaintiff, an employee of the company, was misbehaving with women. He
also informed the plaintiff’s wife.

Held: That the communication to the Chairman was privileged but not to the wife for
although she had an interest in hearing about the allegation, the defendant had no moral or
social duty to inform her.

(b) Statement made in protection of an interest\

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

In Adam-v- Ward
The plaintiff made a complaint in the house of commons against the general
scobell containing charges of wounding character. The General Scobell, as he was compelled to
do by regulations referred the matter to the Army council which after investigations found that
the the attack was unjustifiable. The army council ordered the defendant to publish in the
newspaper a letter to the General Scobell vindicating him and also containing statements
defamatory of the plaintiff. The plaintiff sued.

Held: The occasion of publication was privileged and that the privilege was not destroyed
either by the number of people whom the publication might reach or by reason of the fact that
the publication contained matter defamatory of the plaintiff had publicity attacked the
character of the defendant.
 In Osborn-v- Boulter
Where some brewers answered a complain by a publican of the poor quality of their beer by
voicing a suspicion that the publican had watered the beer, it was held that the latter
publication was covered by privilege.

The same principle is applicable even when the interest of the defendant is merely the general
interest which he possesses in common with all the others in the honest and efficient exercise
by public officials of duties entrusted to them. Thus any member of public may make charges
of misconduct against any public servant and the communication may be privileged, but the
charge must be made to the proper person i.e. those who have a corresponding interest.

A communication to the wrong person e.g. a publication to the world at large in a newspaper
or otherwise is an excess of privilege and the privilege will thereby be cost

(c) Fair and accurate reports of parliamentary proceedings

This qualified privileged protects the advantage of publicity against any private injury resulting
from the publication. It is not limited to newspaper reports and covers other reports e.g.
Broadcast reports. In order to qualify as fair and accurate the report does not have to be a full
precis of the debate: a “parliamentary sketch” may properly select those portions of the debate,
which will be of public interest. What matters is whether the report is fair and accurate in so
far as the debate concerned the plaintiff’s reputation.

(d) Communication between advocate and client

This is covered by both qualified and absolute privilege. Professional communication between
an advocate and client in connection with litigation is absolutely privileged as was held in
More-v-Weaver 91928) 2 K. B. 520
Other communications which have nothing to do with litigation e.g. the drawing of a clients
will are covered by qualified privilege.

The general restriction is that the communication has to be a professional one for it to be
privileged and also that the relationship of advocate – client must be proved. What passes
between an advocate and a client if the relationship has been established is privileged if, within
a very wide and generous ambit of interpretation, it is fairly referable to the relationship, or,
put in another way, per Lord Atkin in Minter-v- priest (1930) A. C. 558 at 581 “if it consist
of professional communications passing for the purpose of getting or giving professional
advice.”

This would exclude a piece of gossip intersected by the client in a conversation on, say, land
registration e.g. “Have you heard that Jones has run off with Mrs Brown?”

In Minter-v- Priest
The house of Lords held that conversation relating to the business of obtaining a loan for the
deposit sum to be paid on the purchase of Land fall under the professional work of a solicitor,
but that conversations about speculation in land to enable the solicitor to share the profit do not
and that slanders of a third party uttered by the solicitor in the course thereof are not
privileged.

Malice
The defence of a qualified privilege is negativated by malice.
Malice means the presence of improper motive or even gross and unreasoning prejudice. A statement is
malicious if it is made for some other purpose other than the purpose for which the law confers the
privilege.
 In Horrocks-v- Lowe (1975) A. C. 135
The court stated that malice destroys the privilege and leaves the defendant subject to the ordinary law
by which a mistake, however reasonable, is no defence.

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

STRICT LIABILITY: THE RULE IN RYLANDS-v- FLETCHER

Anyone who in the course of non-natural user of his land, accumulates thereon for his own purposes anything
likely to do mischief if it escapes is answerable for all direct damage thereby caused.

This is the rule in Rylands-v- Fletcher 1866 L. R. I. Ext. 265

Facts: - The defendant employed independent contractors to construct a reservoir on the land, which was
separated from the plaintiffs land by adjoining land. In the course the works the contractors came upon some old
shafts and passages on filled with earth. The contractors did not block them up. Unknown to them, the shafts
connected their land with the plaintiff’s mines. When the old shafts into the plaintiffs mines and flooded the
mines. It was found as a fact that the defendant was not negligent, although the contractors had been.

However, although the defendant was neither negligent nor vicariously liable in the tort of negligent for the
negligence of his independent contractors, he was held liable by thoth the court of exchequer chamber and the
House of Lords.

The judgement of the Court of Exchequer chamber was delivered by Blackburn J. at P. 279-280 and it has
become a classical exposition of doctrine.

“We think that the true rule of law is, that the person who for his own purpose brings on his land and collects and
keeps there anything likely to do mischief if it escapes, must keep it in a his peril, and, if he does not do so, is
prima facie answerable for all the damage which is the natural consequence of its escape.”

This may be regarded as the “rule in Rylands-v- Fletcher,”

But what follows is equally important. The court further said;

“He can excuse himself by showing that the escape was owing to the plaintiffs default;… or the act of God; It is unnecessary to inquire what
excuse would be sufficient. The general rule, as above stated, seems to be in principle just. The person whose grass or corn is eaten down by
the escaping cattle of his neighbour or whose mine is flooded by the water from neighbour`s reservoir, whose cellar is invaded by filth of his
neighbours privy, or whose habitation is made unhealthy by the fumes and noiseme vapours of his neighbours alkali works, is damnified
without any fault of his own; and it seems but reasonable and just that the neighbour, who has brought something on his own property which
was not naturally there harmless to others so long as it is confined to his own property, but which he knows to be mischievous if it gets on his
neighbours should be obliged to make good the damage which ensues if he does not succeed in confining it to his own property. But for his
act in bringing it there no mischief could have accrued, and it seems but just that he should at his peril keep it there so that no mischief may
accrue, or answer for the natural and anticipated consequences and upon authority, this we think is established to be the law whether the
things so brought be beasts, or water, or filth, or stenches.”

Lord Cairns in the House of Lords upheld this judgement but restricted the scope of the rule to where the
defendant made a “non-natural use” of the Land.

This decision makes it clear that liability was strict in the sense that the defendant’s liability was neither personal
nor based on a mere vicarious liability for the negligence of his independent contractors.

Requirements of the Rule in Rylands-v- Fletcher

1. The thing
 The rule does not require that the thing should be both likely to escape and likely to do mischief on
escaping. If this were the case, there would be little difference between the rule in Rylands-v- Fletcher
and negligence. Furthermore, in Rylands-v- Fletcher, the thing need not be dangerous in itself. The
most harmless objects may cause damage on escape from a person land.

The rule has been applied to a large number of objects including water, gas, electricity, explosives, oil,
vibrations, poisonous leaves of trees, a flagpist, a revolving chair at a fair ground, acid smuts from a
factory, a car, fire and even at one time gypsies.

In Musgrove-v- Pandelis (1919) 2 K. B. 43

Here the court applied Blackburn J. test Literally where the collected thing did not itself escape but caused
the escape of something else. In this case, the defendant was held liable under Rylands-v- Fletcher for
the escape of a fire which started in the engine of his car was found to be an object likely to do mischief if
it escaped.

The artificiality of this approach was however rejected in Mason-v- Levy Autoparts (1967) 2 Q.B. 530.
In relation to a fire which began in wooden-packing cases stored in the defendants Land.

The test applied was whether the objects were likely to catch fire and the fire spread outside the
defendants premises. The liability was a strict one if this occurred.

In A. G.-vs- Corke (1933) Ch 89

A landowner was held liable under Rylands-v- Fletcher for permitting the camping on his land of gypsies
(cavaran-dwellers) who trespassed and committed damage on neighbouring land.

This case has however received general disapproval in applying the rule in Rylands-v- Fletcher to human
beings. The objection has been that “things” does not include human beings and that liability in the above
case should have been based on nuisance or negligence. (Smith-v-Scott (1973) Ch. 314)

2. Accumulation
The thing must be brought into the land for the defendant’s purposes. The defendant need not own the
land into which the thing is brought. A temporary occupier of land such as a lesee or a person physically
present on the land but not in legal occupation of it such as a licensee is equally within the scope of the
rule and is liable for damage caused upon escape or a thing he has brought onto the land.

In Charing Cross Electricity Supply Co. –v - Hydraulic Power Company (1914) 3 K. B. 772
The rule applied to one who had statutory poser to lay electricity cables under the highway.

In Rigby-v- Chief Constable of North-Amptonshire (1985) I.W.L.R. 1241

The court stated that the rule applied to cases were the defendant was in no sense in occupation of the
land; in this case by firing a canister of gas into the plaintiffs

The requirement that the thing should be on the land for the purpose of the defendant does not mean that
it must benefit the defendant.

In Smeaton-v-Ilford Corporation (1954) I ch,450

It was stated that a local authority which was under a statutory duty to collect sewage collected it for its
own purposes within the rule in Rylands-v-Fletcher.

Where the thing is naturally present on the defendant cannot be liable for its escape under Rylands-v-
Fletcher. The escape of weeds, rocks and floodwater is thus outside the scope of the rule but recent
decisions have established possibility of an action in nuisance for such escape.

The accumulation must thus be voluntary.

3. Non-Natural User of Land

This is the most flexible and elusive ingredient of liability.
 Blackburn J. Understood `natural` to mean things naturally on the land and not artificially created
however uncertainty crept in as a result of Lord Cairns qualification that there must be `a non-natural user`
of the land.
Through a series of cases, court have come to look upon `natural` as signifying something which is
ordinary and usual even though it might be artificially instead of non-artificial

Non-natural use of land was explained by the privy council in Richard-v- Lothian (1913) A. C. 263 at
279 per Lord Moulton.

“It must be some special use bringing with it increased danger to others and must not merely be the
ordinary use of the land or such a use as is proper for the general benefit of the community.”

What is natural is now viewed differently in different cases. Non-natural use of land is generally
constituted by certain activities as the storage on the land in bulk of water, electricity, gas and the
collection of sewage by local authorities. It is however, arguable that many of the above example should
be held to be natural use according to the privy council`s definition as being for the general benefit of the
community. In British celenese Ltd.-v-A. H. Hunt Ltd. (1969) I. W. L. R. 959

It was held that the benefit derived by the community from the manufacturing of electrical and electronic
components made the use of land for such purpose and the storing of strips of metal foil thereon a natural
use of the land.

It is thus to be noted that the scope of `non-natural user` of land has narrowed over the years. The
decision will now depend on the facts of each case. It has been held that generating steam or electricity is
not “non-natural” But that the storing of industrial water under pressure, or gas and electricity in bulk is a
non-natural use.

4. Escape
There is no liability under the rule unless there is an escape of the substance from the land where it is kept.

In Read-v-Lyons &Co. Ltd.

The defendants operated on ammunition Factory as agents of the ministry of supply. The plaintiff was an
appointed inspector for the ministry. In course of carrying out her duties in the factory an explosion
occurred causing her injuries. She based her claim against the defendants on Rylands-v-Fletcher making
no assertion that the defendants had been negligent.

Held: That Ryland-v-Fletcher was inapplicable because there had been no escape of the thing that
inflicted the injury.

The House of Lords defined escape as;

Escape from a place where the defendant had occupation and control over land to a place which is outside
his occupation or control.

It was stated further in this case that Rylands and Fletcher is conditioned by 2 elements:-

葠‫ ﺘ‬.舂᠀萏რ萑ｌ옕 葞რ葠ｌ The condition of escape from the land of something likely
to do mischief it is escaped.
葠‫ ﺘ‬.舂᠀萏რ萑ｌ옕 葞რ葠ｌ The condition of non-natural user of the land.

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

5. Damage
Rylands-v-Fletcher is not actionable per se and therefore there must be prove of actual damage. This
appears to mean actual damage to person or property and it excludes a mere interference with the
plaintiff’s enjoyment of this land, such as would be a ground in an action in nuisance.

Damage recoverable under the rule is limited to damage to person or property.

 In Hale-v-Jennings Bros
The court held that an occupier of land was entitled to damages for personal injury under the Rule in
Rylands-v-Fletcher.

In Cattle-v-Stockter Waterworks Co.

It was held that purely economic loss was not recoverable.

Defences of the rule

1. Consent of the Plaintiff

If the plaintiff has permitted the defendant to accumulate the thing the escape of is complained of, then he
cannot sue if it escapes. Implied consent will also be a defence; thus a person becoming a tenant of
business or domestic premises at the time when the condition of the adjoining premises occupied by the
landlord is such that the happening of the Ryland-v-Fletcher type is likely to ensue, is deemed to have
consented to take the risk of such an event occurring.

In Kiddle-v-City Business Properties Ltd (1942) I K.B. 269

The plaintiff became a tenant of the defendant in a house below the house occupied by the defendant
(Landlord). The gutter of the Landlords house was blocked and when it rained, an overflow of
rainwater from the blocked gutter at the bottom of a sloping roof in possession of the Landlord
and above the tenant’s premises, damaged the stock in the tenants premises. It was held that the
Landlord has a defence as the tenant impliedly consented to the risk of rainwater overflowing into
his premises.

If the accumulation benefits both the plaintiff and the defendant, the plaintiff may be deemed to have
consented to its accumulation e.g. where for the benefit of several occupants’ rainwater is accumulated on
the roof or a water closet installed or water pipes fitted, the several occupants are deemed to have
consented. On the other hand, the defence is not available as between a commercial supplier of gas in
respect of gas mains under the highway. In any event an occupier will not be presumed to have consented
to installations being left in a dangerously unsafe state.

2. Contributory Negligence (Plaintiffs own default)

If the damage is caused solely by the act or default of the plaintiff himself or where the plaintiff is
contributory negligent, he has no remedy.

If for instance a person knows that there is danger of his mine being flooded by his neighbours operations
on adjacent lands and courts the danger by doing some act which renders the flooding probable, he cannot
complain (as stated in Miles-v-Forest Rock Granite Co. Ltd (1918) 34 T. L. R. 500)

In Dunn-v-Birmingham Canal & Co (1872) L. R. T. QB 244

Where the plaintiffs worked a mine under the canal of the defendant and had good reason to know that
they would thereby cause the water from the canal to escape into this mine, it was held that they could not
sue in Rylands-v-Fletcher when the water actually escaped and damaged their mine.

COCKBURN C. J. said; at p. 260

“The plaintiffs saw the danger, and may be said to have courted it.”

3. Act of third Parties (Act of a Stranger)

Where the occupier of land accumulates things on his land, the rule will not apply if the escape of the
thing is caused by the unforeseeable act of a stranger.

In Rickards-v-Lothian (1913) A. C. 263

The plaintiff failed in his claim against the defendant where a third party had deliberately blocked up the
waste pipe of a lavatory basin in the defendants premises, thereby flooding the plaintiff`s premises.
 The basis of the defence is the absence of any nature of control by the defendant. Over the acts of a
stranger on his land and thus the burden is on him to show that the escape was due to the unforeseen act of
a stranger without any negligence on his own part.

If on the other hand, the act of the stranger could reasonably have been anticipated or its consequences
prevented, the defendant will still be liable. While it is clear that a trespasser is a `stranger` for this
purpose, other persons included in this term depend on circumstances.

The occupier is of course liable for the defaults of his servants in the course of an independent contractor
unless it is entirely collateral. He is also liable for the folly of a lawful visitor as well as misconduct of
any member of his family on his premises for he has control over them.

It has also been argued that he ought to be responsible for guests and licensees on his land but a
distinction ought to be taken here for it would be harsh to hold an occupier liable for the act of every
casual visitor who has bare permission to enter his land and of whose propensities to evil he may know
nothing of e.g. an afternoon caller who leaves the garden gate open or a tramp who asks for a can of water
and leaves the tap on.

Possibly the test is, “can it be inferred from the facts of the particular case that the occupier had such
control over the licensee or over circumstances which made his act possible that he ought to have
prevented it? If so, the occupier is liable, otherwise not.”

As regards the escape of dangerous elements brought on the owners land by another person, the owner is
not liable under the Rule. (Whitmores-v-Stanford (1904) Ich 427)

4. Act of God
Where escape is caused directly by natural causes without human intervention in “circumstances which
not human foresight can provide against and of which human prudence is not bound to recognize
possibility” the defence of act of God applies and the occupier is thus not liable. (See Nicholas-v-
Maisland – Discussed in gen. Defences.)

5. Statutory Authority
Sometimes, public bodies storing water, gas, electricity and the like are by statute exempted from liability
so long as they have taken reasonable care. It is a question of statutory interpretation whether, and, if so,
to what extent liability under Ryland-v-Fletcher has been excluded.

In Green-v-Chelsea Waterworks Coo. (1984) 70 L. T. 547

A main belonging to a waterworks company which was authorised by parliament to lay the main, burst
without any negligence on the part of the company and the plaintiffs premises were flooded; the company
was held not liable.

On the other hand, In Charing Cross Electricity Co-v-Hydraulic Power co (1914) K. B. 772
Where the facts were similar, the defendants were held liable. The defendants had no exemption upon the
interpretation of their statute. The distinction between the cases of is that the Hydraulic Power Company
were empowered by statute to supply water for industrial purposes, that is, they had permissive power but
not a mandatory authority, and they were under no obligation to keep their mains charged with water at
high pressure, or at all. On the other hand, the Chelsea water works Company were authorized by statute
to lay mains and were under a statutory duty to maintain a continuous supply of water; it was an inevitable
consequence that damage would be caused by occasional bursts and so by necessary implication the
statute exempted them from liability where there was no `negligence`.

The question whether the rule in Rylands-v-Fletcher applies in all its strictness to local authorities has
been considered but not decided.
 VICARIOUS LIABILITY

The expression “vicarious liability” signifies liability which A may incur to C for damage caused to C by the
negligence or other tort of B. It is not necessary that A should have participated in any way in the
commission of the tort nor that a duty owed in Law by A to C shall have been broken. What is required
is that A should stand in a particular relationship to B and that B`s tort should be referable in a certain
manner to that relationship.

The commonest instance in Law is the liability of a master for the torts of his vicarious liability generally arises
from a contract of service.

Master-Servant Relationship

Who is a servant?
Since vicarious liability generally arises from a contract of service (“servant”) not a contract of services (“independent contractor”) it is
important to determine the indicia of a contract of service.

In an often cited statement in Short-v-J & W Henderson Ltd (1946) 62 T. L. R. at 429, Lord Thankerton said
that there are four indicia of a contract of service;

(a) The master`s power of selection of is servant

(b) The payment of wages or other remuneration
(c) The master`s right to control the method of doing the work, and
(d) The master`s right of suspension or dismissal.

This list has been found helpful in determining whether a master-servant relationship exists but it is not
conclusive. It is not possible to compile an exhaustive list of all the relevant considerations. The court stated in
Market Investigations Ltd.-v-Minister of Social Security (1969) 2 QB. 173 p. 185 per Cooke J:

“The most that can be said is that control will no doubt always have to be considered, although it can no longer
be regarded as the sole determining factor; and that factors which may be of importance are such matters as
whether he hires his own equipment, whether he his own helpers, what degree of financial risk he takes, what
degree of responsibility for investment and management he has, and whether and how far he has an opportunity
of profiting from sound management in the performance of his task.”

The control test is however not conclusively determinant of master-servant relationship especially when dealing with professionals or men of
particular skill.

In Morren-v-Swinton (1965) W. L. R. 576

The defendants engaged a firm of consultant engineers to supervise the construction of certain sewage works. Under the contract, the
defendants were supposed to appoint a resident engineer (to be approved by the consultants) to supervise the works under the general
supervision and control of the consultants.

The plaintiff was appointed as a resident engineer by the defendant and approved by the consultants pursuant to
the terms of the contract. He was paid by the defendant and was entitled to holidays with pay and was liable to
be dismissed by the defendants. He was however delegated to the consultants and was under their general
supervision and control.

Held: Absence of control by the defendant was not necessarily the most important test. The other factors
were enough to show that the plaintiff was clearly employed by the defendant under a contract of service.

It is thus important to state that whether or not a contract of service exists will depend on the general nature of
the contract and no complete general test exists. More helpful is the well-known statement of Denning L. J. in
Stevens-v-Brodribb Sawmilling Co. Pty Ltd. (1986) 63 A. L. R. 573

“It is often easy to recognize a contract of service when you see it, but difficult to say wherein the distinction lies… One feature which seems
to run through the instances is that, under a contract of service, a man is employed as part of a business, and his work is done as an integral
part of the business; whereas under a contract of services, his work, although done for the business, is not integrated into it but is only an
accessory to it.”
An independent contractor will commonly be paid “by the job” whereas a servant will generally receive
remuneration based upon time worked. But a piece worker will still be a servant; and a building contractor is a
contract of services notwithstanding that it may contain provisions for payment by time.

Once the Master-servant relationship is established, the master will be liable for all torts committed by the
servant in the course of the employment.

Hospitals
It has been held that radiographers, house surgeons, whole time-assistant medical officers and probably
staff anaesthetics are employees of the hospital authority for purposes of vicarious liability.

But visiting consultants and surgeons are not employees of the hospital and thus the hospital is not
liable.

In Hillyer-v- St-Bartholomew`s Hospital (1909) 2 K. B. 820

The plaintiff bought an action against the governor of an hospital for injuries allegedly caused to him by
negligence of an operating surgeon. The hospital was a charitable body.

Held: -That the action was not maintainable. The court further stated that the only duty undertaken by the
governors of public hospitals towards a patient who is treated in the hospital is to use due care and skill in
selecting their medical staff. The relationship of master and servant does not exist between the governors
and the physicians and surgeons who give their services at the hospitals (i.e. who are not servants of the
hospital.)

The court further stated that the nurses and other attendants assisting at the operation cease, for the time
being, to be the servants of the governors, in as much as they take their orders during that period
from the operating surgeon alone and not from the hospital authorities.

Where there is a contract between the doctor and the patient, the hospital is not liable.

A hospital is thus liable for negligence of doctors and surgeons employed by the hospital authority under a
contract of service arising in the course of the performance of their professional duties. The hospital
owes a duty to give proper treatment to its patients.

In Cassidy-v-Minister of Health 91951) 2 K. B. 343

The plaintiff entered a hospital for a operation of his left hand, which necessitated post-operational
treatment. While undergoing the treatment he was under the care of a surgeon who performed
the operation and who was a whole-time assistant medical officer of the hospital, the house
surgeon and members of the nursing staff, all of whom were employed under a contract of service.
At the end of the treatment it was found that his hand had been rendered useless.

Held: - The hospital was liable as the owners lay on it to prove that there had been no negligence on its
part or on the part of anyone for whose acts or omissions, it was liable and that the owners had not been
discharged.

A hospital may also be liable for breach of duty to patients to provide proper medical services although it
may have delegated the performance of that duty to persons who are not its servants and its duty
is improperly or inadequately performed by its delegate. An example is where the hospital
authority is negligent in failing to secure adequate staffing as where a delegate is given a task,
which is beyond the competence of a doctor holding a post of his seniority.
Hired servants
A difficult case arises where A is the general employer of B but C, by an agreement with A (whether
contractual or otherwise) is making temporary use of B`s services. If B, in the course of his employment
commits a tort against X, is it A or C who is vicariously liable to X? It seems that it must be one or the
other but not both A&C.

In Mersoy Docks and Harbour Board-v-Coggins and Griffith (Liverpool) Ltd. (1947) A. C. I
 A employed B as the driver of a mobile crane. A let the crane to C together with B as driver to C. The
contract between A and C provided that B should be the servant of C but was paid by A and A alone had
the power to dismiss him. In the course of loading a ship, X was injured by the negligent way in which B
worked the crane. At the time of the accident C had the immediate direction and control of the operations
to be executed by B and the crane e.g. to pick up and move a piece of cargo, but he had no power to direct
how B should work the crane and manipulate its controls.

Held: - That A as the general or permanent employer of B was liable to X. The court stated that there is a
very strong presumption that a servant remains to be the servant of the permanent employer although he
may be the servant of the hirer.

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

Loan of Chattels
In Omrod-v-Crosville Motor Services Ltd. (1953) I W. L. R. 1120 The owner of a car was attending
the Monte Carlo motor rally. He asked a friend to drive his car from Birkenhead to Monte Carlo where
they were to have a holiday together. Where they were to have a holiday together. During the journey, on
a diverted route, the car was involved in an accident.

Held: - At the time of the accident, the car was being used wholly or partially for the owners purposes and
thus the friend was an agent of the owner and in so far as the friend was liable of negligence, the owner
was vicariously liable for his negligence.

Liability in respect f an independent contractor

The employer is generally not liable for torts committed by an independent contractor. The employer is however liable if he is deemed to
have committed the tort. This may occur in the following instances.

1. Whether the employer has authorized the commission of the tort

In many circumstances, the law will attribute to a man the conduct of another being, whether human or
animal, if he has instigated that conduct.

He who instigates or procures another to commit a tort is deemed to have committed the tort himself.

In Ellis-v-Sheffield gas Consumers Co. Ltd. (1853) 2 EL & BL 767

The defendants who had no authority to dig up the streets employed a contractor to open trenches and lay
gas pipes along a street. The contractor carelessly left a heap of stones on the footpath, the plaintiff fell
over them and was injured.

Held: - The defendants were liable since the contract was to do an illegal act, a public nuisance.
The decision would have been different had it been lawful for the defendants to dig up the streets.

2. Torts of Strict Liability

The employer is liable in those circumstances e.g. in Rylands-v-Fletcher the employer was held liable for
the acts of his independent contractors as this was a case of strict liability.

This in torts of strict liability, the employer will be liable even where the tort e.g. the escape is caused by
the negligence of an independent contractor.

In Tarry-v-Aston (1876) I Q. B. D. 314

The defendant employed an independent contractor to repair a lamp attached to his house and
overhanging the footway. As it was not security fastened, the lamp fell on the plaintiff, a passer-by and
the defendant was held liable, because “it was the defendant`s duty to make the lamp reasonably safe, the
contractor had failed to do that. Therefore, the defendant has not done his duty and is liable to the
plaintiff for the consequences.
 Here liability was strict.

3. Negligence
Where there is an element of personal negligence on the part of the employer as to make him liable for the
acts of an independent contractor.

E.g. where the employer is negligent or careless in employing an independent contractor for instance,
where the contractor is incompetent.

Failure to provide precautions in a contract where there is risk of harm unless precautions are taken can
make the employer liable for the tort of the contractor.

In Robinson-v-Beaconsfield Rural Council (1911) 2 ch 188

The defendant employed an independent contractor, one hook, to clean out cesspools in their district. No
arrangements were made for the disposal of the deposits of sewage upon being taken from the cesspools
by hook. Hooks men deposited the sewage on the plaintiffs land.

Held: - The defendants had a duty to dispose the sewage and, on construction of the contract, they had
not contracted with hook for the discharge of this duty (disposing of the sewage) hence they were liable
for the acts of the hook`s men in disposing it on to the plaintiffs land.

4. Where the duty of care is wide

An example is where the independent contractor is dealing with hazardous circumstances, or work which
from its very nature, poses danger to other persons.

In Holiday-v-National Telephone Co (1899) 2 Q B 392

The defendant, a Telephone Company, was lawfully engaged in laying telephone wires along a street.
They passed the wires through tubes, which they laid in a trench under the level of the pavement. The
defendants contracted with a plumber to connect these tubes at the joints with lead and solder to the
satisfaction of the defendants foreman. In order to make the connections between the tubes, it was
necessary to obtain a flare from a benzoline lamb of applying heat to the lamb. The lamb was provided
with a safety valve.

The plumber dipped the lamp into a caldron of melted solder, which was placed over a fire on the
footway. The safety valve not being in working order caused the lamb to explore. The plaintiff, who was
passing on the highway was splashed by the molten solder and injured.

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

Liability of a master-essentials

For a master to be liable for his servant`s torts the tort must have been committed “in the course of employment.”
An act is done in the course of employment if;

(a) It was a wrongful act authorized by the master

(b) It was a wrongful and unauthorized mode of doing some act authorized by the master.

In London County Council-v-Caltermoles (Garages) Ltd. (1953) Ltd (1953) I W. L. R. 997

The defendant employed a general garage hank, part of whose job involved moving vehicles around the garage.
He was only supposed to push the vehicles and not to drive them. On one occasion, he drove a vehicle in order
to make room for other vehicles. Whilst doing so, he negligently damaged a vehicle belonging to the plaintiff.

Held: - That the negligent act was within the course of the garage hand`s employment although he had carried
his duties in an unauthorized manner. His master was thus vicariously liable.

In Muwonge-v-Attorney-General of Uganda (1967) E. A. 17

The appellant’s father was killed during a riot. The shot which killed him was fired by a policeman who had
seen the appellant’s father ran towards a house and had concluded that the appellants father was a rioter.

Held: - The firing of the shot was an act done within the exercise of the policeman`s duty in which the
government of Uganda was liable as a master even though the act was wanton, unlawful and unjustified.

If the act is not done within the course of employment, the master is not liable. In Twine-v-Beans Express. A
van driver employed by the defendant had been expressly forbidden to give lifts to unauthorized persons and a
notice to this effect was displayed on the dashboard. The van driver gave a left to a person who was killed in a
subsequent accident due to the negligence of the van driver. The windows of the deceased brought an action
against the defendant.

Held: - The action by the widows failed because the driver was acting outside the course of his employment.

In this case the act was expressly unauthorized.

General guidelines in determining whether an act was committed during the course of employment

1. Look at the mode of doing the work the servant is employed to do.
In Century Insurance Co-v-Northern Ireland Road Transport Board (1942) A. C. 509
One of the respondent’s employee was delivering petrol to a garage. While the petrol was flowing
from the lorry to the tank, he lit a cigarette and negligently threw away the lighted match which
caused an explosion damages the appellants property. The action of the employee was treated as
being within the course of employment.

On appeal
Held: - The respondents were liable for the damage caused for such an action, whilst for the comfort and
convenience of the employee could not be treated as an isolated act as it was a negligent method of
conducting his work.

In Bayley-v-Manchester Sheffield and Lincolnshire Railway W.

The plaintiff was in a train travelling to Macclesfield and he explained this to the mistakenly believed that
the plaintiff was in the wrong train (that the train was not travelling to Macclesfield) and violently ejected
the plaintiff who suffered injuries.

Held: The defendants were liable because the porter was acting within the cause of employment.

2. Whether the act was authorized within the limits of time and space e.g. if one is employed to work
between 8.00 a.m. and 5.00 p.m., the master is only liable for torts committed within that time frame.

Ruddiman & Company-v-Smith (1989) 60 L. T. 709

The plaintiff was using the lower room of the defendant’s house while the defendant used the upper room for
carrying on business. In the upper room there was a lavatory. The clerk, after duty, went to the lavatory to
wash his hands but on turning on the tap and finding no water, went away without turning the tap off. When
water turned on the next morning, it overflew into the lower room and damaged the plaintiff’s goods.

Held: - The employer was liable for whether or not the use of the lavatory
Within the scope of the clerks employment, it was an event incidental to his employment.

Storey-v-Ashton (1869) L. R. 4 Q B 476

The defendant, a wine merchant, sent his car man and clerk to deliver wine and pick up empty bottles. On
their way back, they diverted to visit the clerks house in the course of which they negligently knocked
down the plaintiff and injured him.

Held: - The defendant was not liable for the injury caused by the negligent driving of the car man for he
was, at that time, engaged in a new and completely unauthorized journey.

3. Whether the act was the initiative of the servant or the master had a certain control.
 In Warren-v-Henlys Ltd (1948) 2 All E. R. 935
Erroneously believing that the plaintiff had tried to drive away from the garage without paying or
surrendering coupons for petrol which had been put in the tank of his car, a petrol pump attendant used
violent language to him. The plaintiff paid his bill and gave up the necessary coupons and after calling
the police, told the attendant that he would report him to his employers. The pump attendant then
assaulted and injured him. In an action for personal injuries against his employers.

Held: - That the defendants were not liable for the wrongful act of their employee. Since the act was one
of personal vengeance and was not done in the course of employment; it not being an act of a class which
the employee was authorized to do or a mode of doing an act within that class.

In Poland-v-John Parr and Sons

Arthur Hall, a carter was employed by John Parr. Parr and his son were conveying a wagon with bags of
sugar. Arthur, on his way home for dinner was walking else to the wagon. The plaintiff, a schoolboy,
was walking home in the same direction with his hand upon one of the bags of sugar.

Honestly and reasonably thinking that the boy was stealing sugar, Arthur gave him a blow on the back of
his neck as a result whereof he fell and the wheel of the wagon injured his foot which was amputated.

Held: - In the circumstance, the carter had implied authority to make reasonable efforts to protect and
preserve the defendants property; that the violence exerted was not so excessive as to take his act outside
the scope of authority and that the defendants were liable.

4. Where there is an express prohibition: -

An express prohibition does not negate liability i.e. a master does not escape liability simply because he
had an express prohibition. For liability to be determined, two factors are considered:
Whether the prohibition limits the sphere of employment. If it does, the master is not liable for an act
done outside the sphere. (Sphere)
Where the prohibition deals with the contract within the sphere of employment. If it does, the
employer will be liable. (Mode)

In Canadian Pacific Ry. Co.-v-Lockhart (1942) A.C. 591 (mode)

A servant of the appellant Company in disregard of written notices prohibiting employers from using
private cars for the purpose of the company’s business unless adequately insured, used his uninsured
motorcar as a means of execution of work which he was ordinarily employed to do in the course of which
he injured the respondent.

Held: The means of transport was incidental to the execution of work, which the servant was
employed to do and that the prohibitions of the use of an uninsured motor car merely limited the mode of
executing the work, breach of the prohibition did not exclude the liability of the company to the
respondent.

In Rand-v-Craig (1919) I ch. I (Sphere)

Carters were employed by a contractor to take rubbish from certain works to his dump and were strictly
forbidden not to hip it anywhere else. Some of the carters, without knowledge of the contractor, and in
contravention of their orders took the rubbish to a piece of unfenced land belonging to the plaintiff as it
was nearer the works that the dump of contractor.

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

5. Whether the act was a deliberate criminal act

In Lloyd-v-Grace Smith & Co (1912) A. C. 716

 The plaintiff had sought advice from the defendants, a firm of solicitors, whose managing clerk conducted
conveyancing work without supervision. He advised the plaintiff to sell some property, fraudulently
persuading her to sign certain documents that transferred the property to him. He disposed of it and kept
the proceeds.

Held: - Even though the fraud had not been committed for the benefit of the employers, nevertheless they
were liable, for the clerk had been placed in a position to carry over such work and had acted throughout
in the course of his employment.

OCCUPIERS LIABILITY

This is the liability of an occupier of premises for damage a done to visitors to the premises

Occupiers liability at Common Law

At common law the duties of an occupier were cast in a descending scale t four different kinds of persons. For
example;

The highest duty of care was owed by the occupier to one who entered in pursuance of a contract with him
e.g. a guest in a hotel. In that case there was an implied warranty that the premises were as safe as
reasonable care and skill could make them

A lower duty was owed to the invitee i.e. a person who without any contract entered on business of
interest both to himself and the occupier e.g. a customer coming into a shop to view the wares he was
entitled to expect that the occupier should prevent damage from unusual danger of which he knew or
ought to have know.

Lower still was the duty of the licensee i.e. a person who entered with the occupiers express or implied
permission but without any community of interest with the occupier; the occupiers duty towards him was
to warn him of any concealed danger or trap of which he actually knew

Finally, there was the trespasser to whom there was owed only a duty to abstain from deliberate or
reckless injury.

Occupiers liability deals with the liability of an occupier of premises and extends to immovable property as open
land houses, railway stations and bridges as well as movable structures like ships, gangways or even vehicles
although lawyers prefer to treat injury in the latter as falling within common law negligence.

Under common law lawful visitors who did not fall under the above classifications of contractual entrance
invites or licensees were not clearly covered and accidents arising from the premises and affecting such persons
were commonly governed by the general law of negligence.

The position of the common law was thought to be unsatisfactory. As lord Denning put it in Slatter v Clay
Cross co Ltd (1956) 2 Q B 264 at 269

‘If a landowner is driving his car down his private drive and meets someone lawfully walking upon it then he is under a duty to take
reasonable care so as not to injure the walker; and his duty is the same no matter whether it is his gardener coming up with his plants a
tradesman delivering his goods, a friend coming to tea, or a flag seller seeking a charitable gift’

The law was thus referred to the law reform committee in 1952 as a result of whose report the occupier’s liability
Act 1957 was passed.

Modern law the occupier’s liability

The act abolished the common law distinction between invites licensees and substitution for it a single duty of
care owed by the occupier to his visitors. The act treats contractual entrants as a separate category but less
significantly than at common law. If there is an express term in the contract warranting safety of the premises
that will govern the case but if the contract is silent on the matter the act provides that there shall be implied into
the contract a term that the occupier owes the entrant the common duty of care. The position of the trespasser
remained the same under the act but was subsequently changed by the Occupiers’ Liability Act 1984
(Mentioned Later)

As before the occupiers duties under the act apply not only to land and buildings but also to fixed and movable
structures and they govern his liability in respect of damage to property as well as injury to the person, including
the property of the persons not themselves the visitors.

Occupier

Duty under the act is imposed upon the occupier. The word ‘occupier’ denotes a person who has a sufficient
degree of control over premises to put him under a duty of care towards those come lawfully upon the premises.
An owner in possession is no doubt an occupier; but an owner who has demised the premises to another and
paired with possessions.

An absentee owner may ‘occupy’ his premises through his servant and thus remain subject to the duty
and he may also be subject to it though he was contracted to allow a third party to have the use of the
premises. There may be more than one ‘occupier’ of the same structure or part of the structure.

Visitors
A visitor is generally a person to whom the occupier has given express or implied permission to enter the
premises. The act extends the concept of a visitor to include persons who enter the premises for any purpose in
the exercise of a right conferred by law for they are to be treated at permitted by the occupier to be there for that
purpose, whether they in fact have his permission or not this would include a fireman attending to a fire or a
policeman executing a search warrant.

Implied permission – this is a question to be decided on the facts of each case and the burden of proving an
implied permission rests upon the person who claims that it existed. Any person who enters the occupier’s
premises for the purpose of communicating with him will be treated as having the occupiers tacit permission
unless he knows or ought to have known that he has been forbidden to enter e.g. by notice ‘no hawkers’.

The occupier may of course withdraw this implied license by refusing to speak or deal with the entrant but if he does so the entrant has a
reasonable time in which to leave the premises before he becomes a trespasser.

The duty owed to a visitor does not extend to anyone who is injured by going where he is expressly or impliedly
warned by the occupier not to go as where a trademan’s boy deliberately chooses to go into a pitch dark part of
the premises not included in the invitation and falls downstairs there (Lewis v Ronald 1909 – 101 c t 534)

Further the duty does not protect a visitor who goes to a part of the premises where no one would
reasonably expect him to go. A person may equally exceed his licence by staying on premises after the
occupier’ permission has expired but the limitation of time must be clearly brought to his attention. The
common duty of care requires that the occupier must be prepared for children to be less careful than
adults but the special characteristics of children are relevant also to the question of whether they enjoy
the statutes of visitors.

In Glasgous Corporation v Tayler (1922) 1 C44 it was alleged that a child aged seven had died from eating
poisonous berried which he had picked from a shrub in some gardens under the control of the corporation. The
berries looked like cherries or large blackcurrants and were of a very tempting appearance to children. It was
held that these facts discussed a good cause of action.

Certainly the child had no right to take the berries or even to approach the bush and an adult doing the same
thing might well have become a trespasser but since the object was an ‘allurement’ the very fact of its being left
there constituted a breach of the occupiers duty.
Common duty of care
The common duty of care owed to all visitors as well as an entrant on contract with implied terms is defined as a
duty take such care as in all the circumstances of the case is reasonable to see that the visitor will be reasonably
safe in using the premises for the purposes for which he is invited or permitted to be there.

The act gives some guidance in applying the common duty of care. In proper cases;

An occupier must be prepared for children to be less careful than adults and

An occupier may expect that a person in the exercise of his calling will appreciate and
guard against any special risks ordinarily incident to it, so far as the occupier leaves him
free to do so.

As to (a) it will be reasonable for the occupier to expect children on his premises unaccompanied but the law is
still as was stated before the Act by Delvin J in Phipps v Rochester Corporation (1955) 1 Q B 450 namely that
some of the circumstances which must be taken into account in measuring the occupiers obligation is the degree
of care for their children’s safety which the occupier may assume will be exercised by the parents.

In this case; the plaintiff a boy aged five was out black berrying with his sister aged seven and they walked across a large open space, which
formed part of a housing estate being developed by the defendants. The defendants had dug a long deep trench I the middle of the open
space a danger, which was quite obvious to an adult. The plaintiff fell in and broke his leg.

Held: A prudent parent would not have allowed two small children to go alone on the open space in question or
at least he would have satisfied himself that the place held no dangers for the children. The defendants were thus
not liable. The judgment of Delvin J squarely placed the primary responsibility for the safety of small children
upon their parents at p 472, he started ‘It is their duty to see that such children are not allowed to wander about
by themselves or at least to satisfy themselves that the places to which they do allow their children to go
unaccompanied are safe for them to go. It would not be socially desirable if parents were as a matter of course
able to shelf the burden of walking after their children from their own shoulders to those who happen to have
accessible bits of land.’

The occupier will have discharged his duty if the place is reasonably safe for a child who is accompanied by the
sort of guardian whom the occupier is in all the circumstances entitled to expect him to have with him.

At to (B) above the general rule is that where an occupier employs an independent contractor to do work, be it of
cleaning or repairing on his premises the contractor must satisfy himself as the safety or condition of that part of
the premises on which he is to work.

In Roles v Nathan (1963) 1 W L R 1117

Two chimney sweeps were killed by carbon monoxide gas while attempting to seal up a sweep hole in
the chimney of a coke-fired boiler, the boiler being alight at the time.

Held: The occupier was not liable for their deaths

As per Lord Denning M R at p 1123 ‘when a house holder calls a specialist to deal with a defective installation
on his premises he can reasonably expect the specialist to appreciate and guard against the danger arising from
the defect.’

Specific aspects affecting occupiers liability

Warning
In most cases a warning of the danger will be sufficient to enable the visitor to be reasonably safe
and so amount to a discharge by the occupier by his duty of care but, if for some reason the
warning is not sufficient then the occupier remains liable.
 Independent character
Where damage is caused to a visitor by a danger due to the faulty execution of any work of
construction maintenance or repair by an independent contractor employed by the occupier the
occupier is not liable if in all the circumstances he had acted reasonably in entrusting the work to
an independent contractor and had taken such steps – if any – as he reasonably ought in order to
satisfy himself that the contractor was competent and that the work had been properly done.

In Haseldine v Daw (1941) 2 K B 343 the plaintiff was going to visit a tenant in a block of flats
belonging to the defendant and was injured when the left fell to the bottom of its shaft as a result of
negligence of the firm of engineers employed by the defendant to repair the left.

Held: That the defendant having employed a competent firm of engineers to make periodical inspections
of the left to adjust it and to report on it had discharged the duty owed to the plaintiff whether the plaintiff
was an invitee or a licensee.

An occupier must take reasonable steps to satisfy himself that the contactors he employs is competent and
if the character of the work permits he must take similar steps to see that the work has been properly done.
Where the technical nature of the work to be done will require the occupier to employ and independent
contractor he will be negligent if he attempts to do it himself.

Liability to trespass

As earlier stated the original common law rule that the occupier was only liable to a trespasser in respect of some
wilful act ‘done with deliberate intention of doing harm or at least some act done with reckless disregard of the
presence of the trespasser’ (Rober Addie & Sons Ltd v. Dumbreck (1929) A C 358 at 365) remained
unaffected by the occupiers liability act 1957. The law underwent substantial alteration and development by the
House of Lords in British Railways Board v Herrington – 1972 A C 877. As a result of this case its occupier
owed the trespasser a duty of common humanity, which generally speaking was lower than the common duty of
care but substantially higher than the original duty. Herringtons case was applied by the courts of appeal on a
number of occasions without undue difficulty. The duty owed to a trespasser was eventually clarified by the
Occupiers’ Liability Act, 1984. Section 1(3) of the act provided that a duty is owed to the trespasser if;

The occupier is aware of the danger or has reasonable grounds to believe that it exists

He knows or has reasonable grounds to believe that the trespasser is in the vicinity of the danger
concerned or that he may come into the vicinity of the danger and

The risk is one against which in all the circumstances of the case he may reasonably be expected to offer
the trespasser some protection.

The duty is to take such care as is reasonable in all the circumstances to see that the entrant does not suffer injury
on the premises by reason of the danger concerned and it may in appropriate circumstances be discharged by
taking such steps as are reasonable to give warning of the danger concerned or to discourage persons from
incurring the risk.

This approach is very close to that if common duty of care and the ordinary negligence duty as the occupier incurs liability where he does not
know but ought to know the facts which would signal to a reasonable man the presence of a trespasser or of the danger to him and the
standard appeals to be objective and not conditioned by the occupier’s own resources.

However, it is submitted that the nature or character of the trespasser is a matter which is very relevant in
determining what the occupier may reasonably be expected to do; the very same precautions which should be
taken to protect a lawful visitor may in some cases be required to protect young trespassing children but it would
be wholly unacceptable that they should be required for the benefit of a burglar or entrant intent on criminal
damage.
A trespasser who continues despite passing prominent warning notice has himself to blame for the injury he may
suffer. The 1984 Act has however no application where there is damage to property and applies only to personal
injury. If therefore P trespasses on D’s property and he suffers injury when his car falls down a disused and
concealed mine shaft he may well be able to recover damages for his personal injuries but not for the loss of his
car.
The Kenyan law on occupier’s liability is governed by The Occupiers Liability Act, Cap 34 Laws of Kenya,
which was enacted in 1963 and revised in 1980. The provisions in relation to the occupiers duty to visitors and
entrants on contract. The act is silent as regards duty to trespassers and does not incorporate the amendments
brought about by the 1984 English Version of the Act. It would thus appear that the Kenyan position as regards
liability to trespassers is the common law position.

Limitations of actions

Under Common Law, there was no limitation of actions. This was changed by Stature by the limitation of
Actions Act, 1623. The Limitation period in respect of all actions was set at 6 years.

The purpose of Limitation was to avoid prejudice to the defendant as far as production of evidence was
concerned.
The limitation period was further reduced to 3 years in respect of tort claims. The English Law on Limitation of
Actions is based on the Limitation Act 1939 as amended by the Law Reform (Limitation of Actions) Act 1954.
These acts were further, amended and the principal Act in England today is the Limitation Act 1980 which
consolidated the Limitation act 1939 with subsequent amending Acts. The 1980 act has further been
substantially amended by the latent Damage Act 1986.

Under the new English Law, the Limitation principles and periods are quite different from the Kenyan position
e.g. Limitation for tort claims is 6 years with exception of personal injuries and defamation which is 3 years.
The Kenyan position is however 3 years and 1 year respectively.

As a result of the foregoing, we shall base this chapter on the Kenyan Law, which is governed by The Limitation of Actions Act, Chapter 22
Laws of Kenya, enacted in 1970 and revised in 1988. The provisions of this Act are largely based of the English 1939 act. Under section 4
(2) of the Kenyan Act, the Limitation period in an action founded on tort is three (3) years, with a proviso that the Limitation period in an
action for Libel or Slander is twelve months i.e. 1 year.

Limitation must be specifically pleaded in order for the defendant to rely on it. The defendant must thus plead
that the cause of action has been extinguished by lapse of time.

In computing the time, the date on which the tort was committed is not counted but the date the plaintiff filed the
suit is counted. For the defendant to succeed, the plaintiff must have filed the claim after three years or one year
in defamation claims.

The general rule is that time begins to run from the date the cause of action arise but this rule has a few
exceptions;

(a) In cases of disability

Section 22 – provides that if on the date when a right of action accrues for which a period of limitation is
prescribed the person to whom it accrues is under a disability, the action may be brought at any time
before the end of six years from when the person ceases to be under a disability or dies, whichever event
first occurs….

Section 22(v) gives a qualification as regards tort. It provides;

“In actions for damages for tort, this section has effect as if the words `six years` were replaced by the
words three years.”

Under Section 2 of the Act S. 2 (2) (b):

“a person is under a disability while he is a minor or of unsound mind; and , without prejudice to the
generally of the foregoing, a person is conclusively presumed to be of unsound mind while he is detained
in pursuance of some written Law authorizing the detention of persons of unsound mind or criminal
lunatics.”
 In cases of disability therefore, time begins to run not from the date the person ceases to be under the
disability or dies. Thus in case of a minor, time generally begins to run on his attaining the age of
majority whereas for persons of unsound mind on their recovering from that state.

As regards tort claims, there is however a further restriction as related disabilities. Under Section 22 (v)
(a);
“In actions for damages for tort, this section does not apply unless the plaintiff proves that the person
under the disability was not, at the time when the action accrued to him, in the custody of his patient.”

Thus where the person under disability is in the custody of a parent or a guardian, time begins to run on
the date when the cause of action arises in tort as the presumption is that the parent or guardian ought to
sue on behalf of the person under disability.
This restriction only relates to tort claims.

(b) Fraud, Mistake and Ignorance of material Facts

This is provided for in PART III C of the act. PART III deals with extension of periods of Limitation
Under Part III C, section 26,
“Where, in the case of an action for which a period of Limitation is prescribed, either-

The action is based upon the fraud of the defendant or his agent, or of any person through whom he
claims or his agent; or
The right of action is concealed by the fraud of any such person as aforesaid; or
The action is for relief from the consequences of a mistake.

The period of limitation does not begin to run until the plaintiff has discovered the fraud or the mistake or
could with reasonable diligence have discovered it.

As regards ignorance of material facts in actions for negligence, nuisance or breach of duty.
The act S. 27 (I) provides that S. 4 (2) which deals with limitation period, will not afford a defence to the
defendant in an action founded on tort where.

The action is for damages for negligence, nuisance or breach of duty (whether the duty exists by
virtue of a contract or of written law or independently of a contract or written Law); and

The damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or
include damages in respect of personal injuries of any person; and

The court has, whether before or after the commencement of the action, granted leave for the
purposes of this section.

Section 27(2) provides that the material facts relating to the cause of action under subsection (I) should
have been or includes facts of a decisive character which were at all times outside the knowledge (actual
or constructive) of the plaintiff.

This is where the plaintiff is ignorant of material facts relating to the cause of action under this section, the
defendant will not succeed in his defence that the suit was filed over three years after the cause of action
arose. This section has however 2 qualifications.

The plaintiff must have discovered the material facts;

Either after the three year period prescribed for that cause of action or not earlier that one year before
the end of the three year period; and
In either case, at a date not earlier than one year before the date on which the action was brought.

Further, under S. 27 the plaintiff must seek leave of the court for extension of the limitation period. Under
S. 28(1) such application shall be made ex parte.
There are also some specific limitation period in relation to certain statutes e.g. Under the Government
Proceedings Act, when suing a public corporation, Local Authorities and Government, the Limitation
period is one (1) year.
8.2 THE LAW OF SUCCESSION
8.2.1 Introduction

The law of succession on death is the branch of the Kenya law which governs the "transmission" of
property vested in a person at the moment of his death to some other person or persons. The transmission
occurs in two stages, namely:

(i) A passing by operation of law to one or more representatives of the deceased person for the purposes
of administration, and

(ii) A transference, usually by the act of the representatives, to the persons entitled to the beneficial
enjoyment of the "net estate" (i.e. the property left after funeral expenses, taxes and debts have been
paid).

The transmission to a personal representative is advantageous because:

(a) It enables the property left by the deceased to be preserved and protected pending its
distribution.

(b) It affords an orderly and equitable machinery for the proper adjustment of the rights and
duties of the deceased's creditors and debtors.

(c) It provides machinery for the property distribution of the balance among those
beneficially entitled thereto.

8.2.2 Testamentary and intestate succession

The law of succession falls into two branches, namely:

(i) The law of testamentary succession. This regulates the devolution and distribution of the property of
a person who dies testate (i.e. after having made a will disposing of it).

(ii) The law of intestate succession. This regulates the devolution and distribution of the undisposed-of
property of a deceased person.

8.2.3 Wills

A 'will' is defined by S.2 of the Law of Succession Act as "the legal declaration by a person of his wishes or
intentions regarding the disposition of his property after his death, duly made and executed according to the
provisions of Part II (of the Act), and includes a codicil".

Codicil

A codicil is defined by the said section as "a testamentary instrument made in relation to a will, explaining,
altering or adding to its dispositions or appointments, and duly made and executed as required by the
provisions (of this Act) for the making and execution of a will".

A will is a means of disposing of property taking effect at the disponor's death on the property then his or
which falls into his estate after his death, but meantime having no legal effect and remaining secret and
revocable. It is not effective until the testator's death; until then it is liable at any time to be wholly revoked,
it is a mere expression of intention at the time that it is made. It is said to be ambulatory.

8.2.4 Capacity to make a will

 S.5(1) provides that "any person who is of sound mind and not a minor may dispose of all or any of his free
property by will, and may thereby make any disposition by reference to any secular or religious law that he
chooses".

A "minor" is defined as "any person who is not of full age" (i.e. 18 years).

8.2.5 Formalities

S.8 provides that a will may be made either orally or in writing.

(i) Oral will

No oral will shall be valid unless:

(a) it is made before two or more competent witnesses, and

(b) the testator dies within a period of three months from the date of the making of the will.

However, an oral will made by a member of the armed forces or merchant marine during a period of
active service shall be valid if the testator dies during the same period of active service,
notwithstanding the fact that he died more than three months after the date of the making of the
will.

If there is any conflict in evidence of witnesses as to what was said by the deceased in making an oral
will, the oral will shall not be valid except so far as its contents are proved by a competent
independent witness. (S.10). No oral will shall be valid if it is contrary to any written will which the
testator has made, and which has not been validly revoked (S.9(2)).

(ii) Written will

S.11 provides that no written will shall be valid unless:

(a) the testator has signed or affixed his mark to the will, or it has been signed by some other
person in the presence and by the direction of the testator;

(b) the signature or mark of the testator, or the signature of the person signing for him, is so
placed that it shall appear that it was intended thereby to give effect to the writing as a
will;

(c) the will is attested by two or more competent witnesses, each of whom must have seen the
testator sign or affix his mark to the will, or have seen some other person sign the will, in the
presence and by the direction of the testator, or have received from the testator a personal
acknowledgement of his signature or mark, or of the signature of that other person.

Each of the witnesses must sign the will in the presence of the testator, but it shall not be
necessary that more than one witness be present at the same time. No particular form of
attestation shall be necessary.

S.13(1) provides that a will shall not be considered as insufficiently attested by reason of any
benefit thereby given, either by way of bequest or by way of appointment to any person
attesting it, or to his or her spouse.

8.2.6 Bequest to witness

S.13(2) provides that a bequest to an attesting witness or his or her spouse shall be void unless the will is
also attested by at least two additional competent and independent witnesses. S.2 defines an "independent
witness" as " a witness who is not a beneficiary under a will or the spouse of any such beneficiary".
8.2.7 Revocation

S.17 provides that a will may be revoked or altered by the maker of it at any time when he is competent to
dispose of his free property by will. A will or codicil may be revoked by -

(a) Another will or codicil declaring an intention to revoke it.

(b) The burning, tearing or otherwise destroying of the will with the intention of revoking it by the
testator, or by some other person at his discretion (S.18(1)). However, a written will shall not be
revoked by an oral will. (S.18(2)).

(c) The marriage of the maker, unless the will was expressed to be made in contemplation of
marriage with a specified person and the marriage was with the specified person. (S.19).

8.2.8 Alteration

No alteration made in a written will after the execution thereof shall have any effect unless the alteration is
signed and attested as a written will is required to be (Under S.11)

8.2.9 Provision for dependants

When a person dies, then, on the application by or on behalf of a dependant, the court may, if it is of the
opinion that the disposition of the deceased's estate effected by his will, or by gift in contemplation of death,
or the law relating to intestacy, or the combination of the will, gift and law, is not such as to make
reasonable provision for that dependant, order that such reasonable provision as the court thinks fit shall be
made for that dependant out of the deceased's net estate.(S.26).

Such provision may be:

(a) a specific share of the deceased's net estate;

(b) any past, present or future capital or income from any source of the dependant;
(c) a lump sum, subject to such conditions as the court thinks fit (S.27).

Before making the order the court shall have regard to:

(a) the nature and amount of the deceased property,

(b) any past, present or future capital or income from any source of the dependant;
(c) the existing and future means and needs of the dependant;
(d) whether the deceased had made any advance or other gift to the dependant during his lifetime;
(e) the conduct of the dependant in relation to the deceased;
(f) the situation and circumstances of the deceased's other dependants and the beneficiaries under his
will;
(g) the general circumstances of the case, including, so far as can be ascertained, the testator's reasons for
not making provision for the dependant. (S.28)

"Dependant" is defined by S.29 as—

(a) the wife or wives, or former wife or wives, and the children of the deceased whether or not
maintained by the deceased immediately prior to his death;

(b) such of the deceased's parents, step-parents, grand-parents, grandchildren, step-children, children
whom the deceased had taken into his family as his own, brothers and sisters, and half-brothers and
half-sisters, as were being maintained by the deceased immediately prior to his death; and

(c) where the deceased was a woman, her husband if he was being maintained by her immediately prior
to the date of her death.

8.2.10 Personal representative

 S.2 defines a "personal representative" as "the executor or administrator of a deceased person".

(a) An "executor" means "a person to whom the execution of the last will of a deceased person is, by the
testator's appointment, confided". (S.2)

(b) An "administrator" means "a person to whom a grant of letters of administration has been made".

8.2.11 Intestate succession

A person is deemed to die intestate in respect of all his free property of which he has not made a will which
is capable of taking effect (S.34). Intestate succession is governed by the provisions of Part V of the Act and
are as follows:

Rules of Intestate Succession

(i) "S.35(1) subject to the provisions of section 40, where an intestate has left one surviving spouse and
a child or children, the surviving spouse shall be entitled to—

(a) the personal and household effects of the deceased absolutely; and

(b) a life interest in the whole residue of the net intestate estate:

Provided that, if the surviving spouse is a widow, that interest shall determine upon her re-marriage
to any person.

(ii) A surviving spouse shall, during the continuation of the life interest provided by subsection (1), have
a power of appointment of all or any part of the capital of the net intestate estate by way of gift taking
immediate effect among the surviving child or children, but that power shall not be exercised by will
nor in such manner as to take effect at any future date.

(iii) Where any child considers that the power of appointment under subsection (2) has been unreasonably
exercised or withheld, he or, if a minor, his representative, may apply to the court for the
appointment of his share, with or without variation of any appointment already made.

(iv) Where an application is made under subsection (3), the court may award the applicant a share of the
capital of the net intestate estate with or without variation of any appointment already made, and in
determining whether an order shall be made, and if so what order, shall have regard to—

(a) the nature and amount of the deceased's property;

(b) any past, present or future capital or income from any source of the applicant and of the
surviving spouse;

(c) the existing and future means and needs of the applicant and the surviving spouse;

(d) whether the deceased had made any advancement or other gift to the applicant during his
lifetime or by will;

(e) the conduct of the applicant in relation to the deceased and to the surviving spouse;

(f) the situation and circumstances of any other person who has any vested or contingent interest
in the net intestate estate of the deceased or as a beneficiary under his will, if any; and

(g) the general circumstances of the case including the surviving spouse's reasons for withholding
or exercising the power in the manner in which he or she did, and any other application made
under this section.
(v) Subject to the provisions of sections 41 and 42 and subject to any appointment or award made under
this section, the whole residue of the net intestate estate shall on the death, or, in the case of a widow,
re-marriage, of the surviving spouse, devolve upon the surviving child, if there be only one, or be
equally divided among the surviving children.

Where the intestate has left one surviving spouse but no child or children, the surviving
spouse shall be entitled out of the net intestate estate to—

(a) the personal and household effects of the deceased absolutely; and

(b) the first ten thousand shillings out of the residue of the net intestate estate, or twenty
per centum thereof, whichever is the greater; and

(c) a life interest in the whole of the remainder.

Provided that if the surviving spouse is a widow, that life interest shall be determined upon
her re-marriage to any person.

2. The Minister may, by order in the Gazette, vary the amount specified in paragraph (b) of
subsection (1).

3. Upon the determination of a life interest created by subsection (1), the property subject to that
interest shall devolve in the order of priority set out in section 39.

. A surviving spouse entitled to a life interest under the provision of section 35 or 36, with the consent
of all co-trustees and all children of full age, or with the consent of the court, may, during the period
of the life interest, sell any of the property subject to that interest if it is necessary for his own
maintenance.

Provided that, in the case of immovable property, the exercise of that power shall always be subject
to the consent of the court.

. Where an intestate has left a surviving child or children but no spouse, the net intestate estate shall,
subject to the provisions of sections 41 and 42, devolve upon the surviving child, if there be only one,
or be equally divided among the surviving children.

. 1. Where an intestate has left no surviving spouse or children, the net intestate estate shall
devolve upon the kindred of the intestate in the following order of priority—

(a) father; or if dead

(b) mother; or if dead

(c) brothers and sisters, and any child or children of deceased brothers and sisters, in equal
shares; or if none

(d) half-brothers and half-sisters and any child or children of deceased half-brothers and
half-sisters, in equal shares; or if none

(e) the relatives who are in the nearest degree of consanguinity up to and including the
sixth degree in equal shares.

2. Failing survival by any of the persons mentioned in paragraphs (a) to (e) of subsection (1), the
net intestate estate shall devolve upon the State, and be paid into the Consolidated Fund.

1. Where an intestate has married more than once under any system of law permitting polygamy, his
personal and household effects and the residue of the net intestate estate shall, in the first instance, be
divided among the houses according to the number of children in each house, but also adding any wife
 surviving him as an additional unit to the number of children.

2. The distribution of the personal and household effects and the residue of the net intestate estate within
each house shall then be in accordance with the rules set out in sections 35 to 38.

Where reference is made in this Act to the "net intestate estate", or the residue thereof, devolving upon a
child or children, the property comprised therein shall be held in trust, in equal shares in the case of
more than one child, for all or any of the children of the intestate who attain the age of eighteen years or
who, being female, marry under that age, and for all or any of the issue of any child of the intestate who
predecease him and who attain that age or so marry, in which case the issue shall take through degrees,
in equal shares, the share which their parent would have taken had he not predeceased the intestate.

. Where—

An intestate has, during his lifetime or by will, paid, given or settled any property to or for
the benefit or a child, grandchild or house; or
Property has been appointed or awarded to any child or grandchild under the provisions of
section 26 or section 35.

That property shall be taken into account in determining the share of the net intestate estate finally
accruing to the child, grandchild or house.
 REINFORCING QUESTIONS
1.
(a) What is meant by “the tort of negligence”. What are its essentials?

(b) Kamau is employed by “Tropical College of Accountancy in Nairobi as a driver. While he was
transporting some of the college students to the city centre after classes, his attention was diverted when he
saw some girls playing netball in a field next to the road. He lost control of the bus which then landed in a
ditch and some of the students were injured.

The injured students seek your advice as to whether they should use the college or Kamau for damages.
What advice would you give them?

2.
(a) What is meant by the common duty of care owed by an occupier of premises? What factors will affect
this duty?

(b) X is a sewerage expert, who goes on to Y’s land at Y’s request to improve Y’ drainage and sewerage
system. Whilst checking out a drain, X is overcome by noxious fumes and fumes and becomes seriously
ill. The fumes are a result of a blockage in Y’s plumbing, which had recently been overhauled by Z, a
reputable plumber. Discuss the legal position.

3.
(a) Explain four defences to the tort of trespass to chattels

(b) Mr. Bird, employed Masanduku as a cashier in his tour operation business. Three days ago, Mr. Bird
could not trace his cheque book in the office and held Masanduku as a suspect. He then locked
Masanduku in his office situated on the 6th floor and left the office to call the police. Half way through
the journey, Mr. Bird discovered he had left the cheque book at home. He then returned and opened the
door for Masanduku. Masanduku was aggrieved because of the confinement and intends to sue Mr. Bird.

Advise Masanduku.

4.
(a) In order to maintain action for defamation, the aggrieved party must establish four ingredients of
defamation. Explain the four ingredients.

(b) Shauri and Mueni are business ladies who run a business of supply of stationery at Mlango House. Ther
offices are next to each other. Last week, Shauri accused Mueni of luring her customers and the two
ladies had a violent quarrel. Shauri then wrote several leaflets and distributed them within Mlango House
in which she described Mueni as “a woman of loose morals and of no substance”. She further accused
Mueni of having an affair with the care-taker of the building premises where their business is operated.
Mueni is unknown to the care-taker and she is a morally upright married lady.

5.
(a) When may an employer be liable for the torts committed by his workers?

(b) Mambo, a truck driver was instructed by his employer to go and collect goods from a railway station
which was ten miles away from the employer’s place of business. On the way to the station, he decided to
call at home in order to see his sick child. In the course of the deviation, he collided with another lorry
because of his careless driving as he wondered what would happen to his sick child.

To what extent is his employer liable for the accident?

6.
(a)
(i) State the rule in Rylands – vs – Fletcher.
 (ii) Outline the circumstances under which it may apply.

(iii) Highlight the circumstances under which it will not apply

(b) Maundu went to Chandaria Ceramics Ltd. to purchase floor tiles. Earlier in the morning, Mpole, an
employee of Chandaria Ceramics Ltd. had polished the floor of the premises which was now very
slippery. As Maundu was leaving the shop after purchasing the tiles, he slipped and fell on the floor
seriously injuring his leg which got a fracture. Chandaria Ceramics Ltd. had not put up any warning signs
about the slippery floor.

Can Maundu successfully sue the company? Advise him.

Check your answers with those given in Lesson 9 of the Study Pack TO BE SUBMITTED AFTER
LESSON 8

To be carried out under examination conditions and sent to the Distance Learning Administrator for marking by the
College.

EXAMINATION PAPER. TIME ALLOWED: THREE HOURS. ANSWER ALL QUESTIONS

1. (a) Outline the structure of the courts of law in Kenya.

(b) What is judicial precedent? To what extent is judicial precedent a source of law in Kenya?

2. (a) Describe the steps a complainant must take to institute judicial proceedings against the state.

(b) Giving appropriate examples, discuss the meaning and purpose of the law of limitation of actions.

3. Give an outline of the legal characteristics of the following:

(a) Partnership;
(b) Limited liability company.

4. (a) What are vitiating factors in the law of contract? Explain with aid of decided cases.

(b) Mrembo sends her car to Mdosi for repairs. Upon being given the bill, Mrembo objects to pay the bill
on the basis that it is exorbitant. Mdosi refuses to release the car whereupon Mrembo issues a cheque
in settlement of the bill. Upon receipt of the car Mrembo cancels the cheque since, she argues, she
did not willingly pay for the services. Advise Mdosi.

5. (a) Under the Sale of Goods Act (Cap.31) when does property in goods sold pass from the seller to the
buyer?

(b) Tajiri sells all the tomatoes ready for harvest in his farm with immediate effect to Juakali who pays
the agreed sum. When Juakali goes to harvest the tomatoes two days later, he finds them damaged by
natural causes. Tajiri refuses to refund the money. Advise Juakali.
 THE LAW OF PROPERTY
PROPERTY LAW

Property law is concerned with the bundle of rights persons may exclusively have in time over
a given situation. It defines the range of functions persons may exercise in given situations at
a given time , the so called functional theory of property.
The idea of property is a consequence of social evolution regardless of the origin of the property and the legal
system recognises a category of rights relating to property.

Property law declares what society regards as property, it creates or constitutes property rights, defines the legal
incidence of those rights i.e. their content, regulates the dynamics of property rights and prescribes the conditions
for the availability of the rights.

Property in land
The legal conception of land under English Common Law is expressed in the maxim.
Cujus est solum, ejus est usque ad coelum et ad inferos. Land embraces not just the physical straturm but
fixtures , water and all things found in the aerospace above the geospace. However, this conception had to yield
to both common law and statutory exceptions to facilitate new forms and patters of land use, and the Kenyan
legal system assimilates some of these exceptions, for example:
the common law maxim of quic quid plantatur solo solo cedit relating to fixtures is subject to various
exceptions respecting:
Trade fixtures i.e. fixtures necessary for the carrying out of atenants trade

Ornamental and domestic fixtures

Agricultural Holdings Act 1948

To ascertain whether a fixture was excepted by the rule regard has to be made to:
The nature of the fixture
The degree of annexation to the soil
The purpose or object of annexation

Minerals by reasons of their importance e.g. under the Mining Act Cap 306
Water under the Water Act Cap 372
The aerospace: Under the aerodromes (control of obstruction) Act Cap 396, Electricity Supply Lines Act Cap
315 and the Wayleaves Act Cap 292, Sectional Properties Act. These statutes reduce the appropriation of the
aerospace.

African customary law confines the conception of land to the physical solum.

In summary property in land means the exclusive control of the soil everything up to the sky and down to centre
of the earth. However, the degree of control or of enjoyment an individual or community may have over land,
vary with the nature of the rights vested.

Cases of property rights in land

Property rights in land generally fall into three categories namely estates, servitudes and
encumbrances.
Estates
At common law, the doctrine of estates addresses the question of duration in the enjoyment of
proprietary interests in land. Estates in this sense fall into two main categories, namely
Freehold estates
Estates other than freehold

Freehold estate:
These estates confer a bundle of rights exercisable for an indefinite duration i.e. not time limit is attached. The
state cannot determine the duration even though it is the granting authority. These estates may be by inheritance
or otherwise.

The rights thereby conferred can be transmitted to future generations indefinitely. Freehold estates of
inheritance are the fee simple and fee tail. A fee simple estate can be inherited by an issue and there are no
conditions attached. The fee tail on the other hand limits the number of issues capable of inheriting the estate.
The freeholder has capacity to determine who will inherit the estate e.g. the English doctrine of primo geniture
is explicit that in the event of death of the holder, the estates devolves to the first born male.

Freeholds other than by inheritance were purely life interests and a life estate and an estate per autre vie i.e. an
estate in the life of another. Such an estate lapses in the event of death of the person on whose life it is based.

Estates other than freeholds are leaseholds.

Servitudes
These are rights in alieno solo i.e. rights conferring a power over another person’s estate for the benefit of the
right holder or of his estate. The common law conception of servitudes consists of:
Easements
A profit a prendre
Restrictive covenant

Encumbrances
These are generally rights in alieno solo but constitute burdens on the property they are subject to and are
temporal in character. They are either mortgages or charges.

Under Kenyan law, the creation of common law estates other than the fee simple is prohibited. Estates in Kenya
are either
Fee simple
Leasehold
Absolute proprietorship

Communal property
Absolute proprietorship as an estate was created by the Registered Land Act Cap 300. It is an estate sui generis
Section 27 (a) of the Act provides that:

“Subject to this Act, the registration of a person as the proprietor of land shall vest in that person the absolute
ownership of that land together with all rights and privileges belonging or appurtenant thereto”.

Under 28 of the Act:

“The rights of a proprietor, whether acquired on first registration or whether acquired subsequently for valuable
consideration or by an order to court, shall not be liable to be defeated except as provided in this Act, and shall
be held by the proprietor, together with all privileges and appurtenances belonging thereto, free from all other
interests and claims whatsoever…”

Generally therefore, primary interests in land are either

Fee simple
Absolute proprietorship
Community property

Secondary interests are either

leaseholds
Servitudes
Encumbrances

Question has arisen as to who may become a proprietor. Property rights may be held by:
State: The state enjoys property rights by virtue of its sovereign power i.e. by dominion and as an individual.
As a general rule, the state is the proprietor of most land in Kenya other than trust land. There is no public land
in Kenya.
Public: This occurs where radical title inland is vested on people e.g. in Lesotho, land belongs to the people but
is vested in the King as trustee as is the land in Swaziland

Individuals: This is a phenomenon whereby property rights are vested exclusively in an individual.

Proprietorship may be exclusive, concurrent or consecutive. It is exclusive where the bundle

of rights are exercisable by the proprietor to the exclusion of all other persons. It is
concurrent where two or more proprietors have similar rights over the same property. Such
property is exclusive to the parties. It may be family property or co-operative property. It is
consecutive where interest in land is created successively one after the othe4 and
proprietorship changes with time e.g. strict statement, trusts and perpetuities. Consecutive
ownership is largely restricted by the Trust of Land Act Cap 290 and the Registered Land Act
Cap 300.

These three categories of proprietorship pose peculiar problems, for example, concurrent
proprietorship may be either: (1) Joint
Common or
By entities

Joint proprietorship
This is a situation where property is owned by two or more persons. The property enjoys all the properties of a
single owner. It is characterised by the four unities.

Unity of title: The title conveyed must derive from the same title.
Unity of possession: All proprietors are entitled to each and every part of the land. All have similar rights to use
the land.
Unity of interest: All proprietors must hold an interest of the same nature extend and duration.
Unity of time: The proprietors’ interests must vest at the same time

One of the major consequences of the town unities is jus accrescendi i.e. the right of survvorship i.e. in the event
of death of one of the proprietors, proprietary rights vest in the survivor or survivors. The doctrines of jus
accrescendi ordains that interest in joint property cannot pass by will or intestacy. At common law, if joint
proprietors die at the same time, the younger party is deemed to have survived the older hence his heirs inherit.
However, if a joint proprietor kills another, he cannot inherit since at common law, one must not benefit or profit
from personal inequity.

Under Section 102 (1) of the Registered Land Act:

“Where the land, lease or change, is owned jointly, no proprietor is entitled to any separate share in the land, and
consequently –
dispositions may be made only by all the joint proprietors, and
on the death of a joint proprietor, his interest shall vest in the surviving proprietor or the surviving proprietors
jointly.”

Common proprietorship
A conveyance to two or more proprietors as common proprietors confer separate but
undivided shares in the property, hence, in the event of death of a proprietor, the right of
survivorship does not exist. A common owner can only transfer his share with the consent of
the others.

Under Section 103 (1) of the Registered Land Act, Cap 300
“Where any land, lease or change is owned in common, each proprietor shall be entitled to an
undivided share in the whole and on the death of a proprietor his share shall be administered
as part of his estate.
Under Section 103 (2)

“No proprietor in common shall deal with his undivided share in favour of any person other
than another proprietor in common of the same land except with the consent in writing of the
remaining proprietor or proprietors of the land, but such consent shall not be unreasonable
withheld”.

Under the provisions of the Sectional Properties Act of 1987, it is possible to own property
concurrently. One cannot have proprietary rights without the soil. Sectional property
involves horizontal division of property rights. The Sectional Properties Act came into force
on April 1st 1990
Consecutive proprietorship
Property rights in land can be conveyed in such a manner that the original interest is
transferred from one person to another for a specified duration consecutively. This is the
creation of one interest after another.
The state may take property from private owners and relocate it for public use or regulate the use of private
property i.e. police power. This contrasts with the principle of eminent domain, which is the power of the state
to take over private property for public use. The state therefore compels a transfer of the property from a private
holder to itself. This principle is traceable to ancient Rome and feudal England where property could be taken
over by the state for public purposes. It extinguishes private rights, subject to compensation. The property must
be intended for public use and the state must compensate the holder adequately failing which, the holder is
entitled to apply to the court for such compensation. The state must comply with the prescribed procedures to
enhance fairness. The doctrine of eminent domain is embodied in Section 75 of the Constitution.

On the other hand, the doctrine of police power is today invoked to facilitate proper utilization and management
of natural resources. This power is an attribute of state sovereignty. It is an incidence of political jurisdiction. It
does not extinguish private proprietary rights and no compensation is payable. This power is excisable to:
Regulate use of agricultural land under the Agricultural Act for proper utilisation and management of
agricultural land so as to maximise output.
Facilitate division of land to two or more parcels under separate titles.
Facilitate the sale, transfer or mortgage the land.
Regulate the use of development of land in urban areas under the Town Planning and the Land Planning Acts.
THE NATURE OF INTEREST IN LAND

FREEHOLD
Fee simple
This is the largest estate that can be acquired form the state. However, it is not an allodium
hence in the event of failure of an issue, the estate escheats to the state. This estate confers
unlimited rights of use, abuse and disposition, the proprietor has unlimited right of abuse, i.e.
cannot be impeached for waste i.e. any act which changes or alters the nature of land. Waste
falls into four categories namely:
Ameliorating – Changes that improve the value of the property.
Permissive – These are acts of commission which may or may not be to the detriment of the land.
Voluntary waste: These are acts of commission detrimental to the land
Equitable waste: These are acts of wanton destruction.

At common law, a freeholder is free to commit any or all of the aforementioned wastes.
Leaseholders may commit ameliorating waste but no other.
The fee simple holder has liberty to dispose of his property by deed, or will. Such disposition may be partial or
wholly, conditionally or unconditionally.
The character of a fee simple estate is that it is unlimited in duration and can therefore pass to descendants.

Creation of the estate

By grant: Such grants may be staturoty, inter vivos or testamentary.
Section 307 Cap 290 confer upon the president the power to make grants or dispositions of “any estates, interest
or rights on or over unalienated government land”.

Under Section 8 of the I.T.P.A,

“…transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of
passing in the property and in the legal incidents thereof”.

Under the Law of Succession Act Cap 160, Laws of Kenya, a fee simple is transmittable by will.

Enfranchisement: Under Section 27 of Cap 280, agricultural leases contain an option by which the lesee on
expiration of the lease and due compliance with the covenants and conditions of the lease;

“Shall be entitled to a grant of freehold…on payment of the unimproved value of the land at commencement of
the term”.

Absolute proprietorship:
This estate is traceable to the Crown Lands ordinance 1902 by which all land in Kenya
became Crown land making individuals tenants of the state. After q948, the colonial
government divided Kenya into Crown land and Native land. Whereas crown lands were
vested in the state, native lands were vested in Native Lands Trust Board. In 1963, the Native
Land Trust Board was abolished. The land became trust land and was vested in County
Councils. A working party established in 1957 recommended that natives be accorded
absolute ownership of the land they held. This recommendation was embodied in the
Provisions of the Registered Land Act, Cap 300
Under the Provisions of the Trust Land Act upon registration of land, the County Council loses all proprietary
rights, which are then vested in the individual. It therefore follows that absolute proprietorship is an allodium
since the proprietor has a radical title. The estate created by Sections 27 and 28 of the Registered Land Act is
technically larger than the fee simple. However, treating absolute proprietorship as an allodium is problematic
and it is generally deemed to be an estate sui generis.

The registration of customary land under a single owner, after adjudication has created legal problems, since the
registration confers absolute proprietorship on the person to the exclusion of other customary holders. Question
has arisen as to whether “customary trusts” exist.

Under Section 27 and 28 of the Registered Land Act, Cap 300 absolute proprietorship confers “all rights and
privileges associated with such ownership”. These rights include the right to use, abuse and to dispose and
under Section 28 are:
“not liable to be defeated except as provided in the Act… free from all other interests and
claims whatsoever”.
Section 28 prohibits any purported limitations on powers of disposition, prohibits the insertion of conditions of
defeasance in the grant. It also prohibits conditions restraining use, except easements, profits licences and
restrictive covenants. However, temporal restraints are permissible.

Sections 27 and 28 of the Act have caused considerable difficulty in land disputes.

Creation of absolute proprietorship

This estate may be created by:

Registration – pursuant to the provisions of Cap 300
Consolidation
Inheritance – maybe by will or through intestacy under the Law of Succession Act.
Conversion from Cap 281 and 282 to Cap 300 – voluntary action by holder or by the minister: Section 2 (c).
Transfer – these are inter vivos. Transactions which must take effect immediately pursuant to Section 87 of the
Registered Land Act.

This estate is not subject to the doctrine of escheat but is subject to bona vacantia

Community property
Large tracts of land not registered under the various registration systems in Kenya are held
under customary law as trust land. Land held in trust and governed by the Trust Land Act is
held in trust for the benefit of the persons resident therein. The title of such property is vested
in the community. Individuals have priority of use. This system of holding land is governed
by rules of obligation which are reciprocal in nature and bind member of the community.
However, there is need for a legal person to be recognised for purposes of registration. This
could be ascertained by determining who has access and control over the land. Access to
communal property is obtained through membership by birth, marriage or adoption. Control
is a political function. The obligation of the controlling authority is to guarantee access,
protect the right of access and ensure that trans-generational rights are not extinguished. The
controlling authority is registered though it is not legally the owner.

LEASEHOLD

This is a secondary interest in land derived from a primary interest. This interest confer upon
others subsidiary powers.

Definition
Under Section 3 of the Registered Land Act Cap 300, Laws of Kenya, Lease means:

“… the grant, with or without consideration, by the proprietor of land of the right to the exclusive possession of
his land, and includes the right so granted and the instrument granting it, and also includes a sub lease but does
not include and agreement for lease”.

The term “lease” refers to a transactions which of itself creates a relationship of landlord and tenant between the
grantor (the Landlord) and the grantee (the tenant). The formal document by which this is done is also called a
lease. Whether a transaction is a lease or an agreement for a lease depends on the intention of the parties and the
rules of law applicable in Kenya, certain leases are registrable hence, such leases the doctrine in Walsh v
Lomsdale is inapplicable. This doctrine states that where an agreement for a lease is one in which specific
performance can be granted, equity will treat the parties as if a lease has already been executed.

Under Section 107 of the I.T.P.A,

“A lease of immovable property from year to year for any term exceeding one year, or reserving a yearly rent,
can be made only by a registered instrument. All other leases of immovable property may be made either by a
registered instrument or by oral agreement accompanied by delivery of possession”.

Under Section 47 of the Registered Land Act, Cap 300, “A lease for a specified period exceeding two years, or
for the life of the lessor or of the lesee, or a lease which contains an opinion whereby the lesee may require the
lessor to grant him a further term or terms which, together with the original term, exceed two years shall be in
the prescribed form, and shall be completed by:
Operating a register in respect of the lease in the name of the lesee, and
Filing the lease and
Noting the lease in the encumbrances section of the register of the lessor’s land or lease.

The doctrine in Walsh v Lomsdale is based on the premise that even without formal execution of a lease, a
proprietary interest passes in equity. However, under the Provisions of the I.T.P.A and RLA, proprietary interest
in certain leases does not pass unless and until they are registered, hence the statutory exclusion of the equitable
doctrine.

However, leases governed by Cap 301 are expected as held by the Court of Appeal in Batchelors Bakery Ltd. v
Westlands Securities Ltd., where law J.A observed “The parties by an agreement in writing, contracted for a
term exceeding five year. This agreement was a contract to the contrary within the meaning of the opening
words of Section 106 of the I.T.P.A., thus excluding the deeming provisions of that Section as to the duration of
certain leases in the absence of written contract. Such an agreement is valid inter pates even in the absence of
registration, although it given no protection against the rights of third parties”.

Leasehold refers to the property or bundle of rights held under a lease. At common law, leaseholds are regarded
as personal estates or chattels real.

Creation of Tenancies
Formalities:
Under Section 3 (3) of the Law of Contract Act, all contracts for the disposition of any interest in land must be
evidenced by a note or memorandum. Absence of writing renders an agreement unenforceable.

Under the I.T.P.A., yearly tenancies for periods exceeding one year or reserve a yearly rental are registrable.
Other tenancies need to be registered but the transaction creating such a relationship must be accompanied with
delivery of possession and no interest passes until the tenant takes possession. Under the Registered Land Act,
Cap 300 all tenancies for periods exceeding two years or for the life of the tenant or landlord must be registered.
Such tenancies are incomplete unless registered.

For registrable leases, statutory forms are prescribed by statutory provisions which prohibit the registrar from
registering any other instrument.
Effect of non-registration
Under the ITPA, non registered transactions are void unless circumstances are such as to raise the presumption
of tenancy under Section 106, as was observed in Bains v Chogley. However, judicial authority appears to
suggest than an unregistered but registrable instrument is valid inter partes rather than void for all purposes.

Under the Registered Land Act, Section 38 (1) is emphatic that

“…every attempt to dispose of the land, lease or charge otherwise than in accordance with this Act shall be
ineffectual to create, extinguish, transfer vary or effect any estate, right or interest in land, lease or charge”.
However, such instruments may operate as contracts, capable of supporting a caution, action for specific
performance or damages or recovery of property.

Characteristics of tenancies or leases

For a transaction to confer a leasehold, it must fulfil several conditions:

Exclusive possession: This is a right to hold the interest to the exclusion of all others. It is a right “unattended
by a simultaneous right of any other person in respect of the same subject matter which means the tenants’ rights
of possession is enforceable against the Land Lord. The Landlord may not interfere with the premises at will
during the currency of the lease. It was so held in Paul Hetch v Morgan where Macdolt observed:

“The whole effect of the agreement of January 19 was to create not a licence but a tenancy. I
therefore agree with the board in its decision…that the present respondent was in exclusive
possession… despite the intention of the appellant the circumstances including the written
agreement constituted the occupation by the respondent a tenancy and not a licence”.
Defined Premises: The premises to which the agreement or lease refers to must be defined or ascertained. In
Heptulla v Thakore it was observed that the description was not capable of creating any recognisable frontier
because the premises intended to be let could not be ascertained hence the intended demise failed.

Certain period: A lease must commence at and exist for a period certain or at or for a period capable of being
ascertained. It was so held in Marshall v Berridge. There must be a certain beginning and a certain ending
otherwise it is not a perfect lease. Vague expression do not do as was in Lace v Chantler.

Scope of grant: The quantum of rights conferred must be definite or capable of being defined. Under Section 8
of the ITPA, “a transfer of property passes forthwith to the transferee all the interest which the transferor is then
capable of passing in the property, and in the legal incidents thereof”.

Section 27 (b) of the Registered Land Act:

“the registration of a person as the proprietor of a lease shall vest in that person the leasehold interest described
in the lease together with all implied and expressed rights and privileges belonging or appurtenant thereto and
subject to all implied and expressed agreements, liabilities and incidents of the lease”.

CLASSIFICATIONS AND TYPES OF TENANCIES

Fixed period tenancies: These are tenancies created for a fixed term. Its commencement and ending must be
specified. Registered Land Act tenancies take effect from the date fixed for commencement. Under Section 51
(2) of the Registered Land Act, “Any instrument purporting to create a lease to commence on a date more than
twenty one years after the date of the instrument or to take effect on the fulfilment of any condition is void”.
A fixed period lease determines when the duration expires.
Periodic tenancies: This is a tenancy which continues indefinitely from periods of one year or less and may be
express or implied.
If the duration is not specified, and no notice period is provided, a periodic tenancy arises.
If a fixed period tenant holds over at the expiry of the period and continues to pay rent, the tenancy becomes
periodic.
Under Section 11(3) of the Registered Land Act “A right of occupation under African customary law recorded in
the adjudication register shall be deemed to be a tenancy from year to year”.

Tenancy at will: This is transaction whereby the tenant occupies the premises on terms that either party may
determine the relationship at any time. The relationship terminates when either party commits an act
inconsistent with the tenancy or on death.

Tenancy at sufferance: This is a tenancy which arises whenever a fixed period tenant holds over without the
landlord’s consent or dissent. A tenant at sufferance enters by lawful title but remains without any title at all. It
is created by operation of law. If rent is paid and accepted, the relationship becomes a periodic tenancy. Such a
tenant may be ejected without notice. However, the tenant is not a trespasser.

Service Tenancy: This is tenancy created to enable the tenant occupant perform a particular service. The
occupation is ancillary to the performance of services. The tenant has a lease determinable at any time and on
determination of employment. This tenancy is governed by ordinary law of tenancies.

RIGHTS AND OBLIGATIONS OF PARTIES

Like any other contractual relationship, a lease confers certain rights and imposes obligations on the parties. As
a general rule, the parties thereto specify the premises, terms, rent, rights and obligations accruing. However, if
the agreement is silent, the law implies certain rights and obligations which bind the parties. These rights and
obligations are now embodied in Section 53 of the Registered Land Act, Cap 300 and Section 108 of the ITPA.
However, the parties are free to contract out of the implied terms.

Obligations of the landlord

Duty not to derogate from the grant
The Landlord is obliged not to act in such a way as to render the premises unfit for the
purposes for which it is rented.
Under Section 53 (b) of the Registered Land Act, the Landlord must not “use or permit to be used any adjoining
or neighbouring land of which he is the proprietor or lessee in any way which would render the leased premises
unfit or materially less fit for the purpose for which they were leased.”

Duty to ensure quiet enjoyment

The landlord, his agents and servants must not interfere with the tenants’ enjoyment of the
premises. Section 53 (a) of the Registered Land Act is emphatic that “ the lessee shall and
may peaceably and quietly possess and enjoy the leased premises without any lawful
interruption from or by the lessor…”
Duty to grant premises fit for purpose.
The Lessor or landlord must ensure that the premises let is fit for the particular purpose for
which it were let. Under Section 53 (d) of the Registered Land Act, the lessor must ensure
that “the house, flat or room is fit for habitation at the commencement of the tenancy…”
Additionally, the lessor is obliged to disclose any material defect in the property with
reference to the intended use, which the lessee could not with ordinary care discover.
Duty to suspend or adjust rent
As a general rule, the doctrine of frustration does not apply to leases; Paradine v Jane. This is because the duty
of the lessor is to put the lessee into possession. If the premises or part thereof are destroyed or damaged by a
cause not attributable to the tenants negligence, so as to render the premises as part thereof or wholly or partially
unfit for occupation or use, the lessor is bound to suspend rent or a just proportion thereof depending on the
nature of damage, until the leased premises or part thereof is rendered unfit for occupation or use. However, if
the premises is not rendered fit for occupation and use within 6 months of the damage or destruction, the lessee
may by giving a one month’s written notice determine the lease.

Under Section 108 (e) of the ITPA, the lease is voidable at the option of the lessee

Duty to put the tenant in possession

The lessor is bound to hand over to the tenant such means as will enable him enter into
occupation. Under section 108 (A) (b) of the ITPA, “The lessor is bound on the lessee’s
request to put him in possession of the property.”
Duty of repair
As a general rule, it is the duty of the lessor to repair the roof, main walls, main drains,
common passages and installations. This duty is imposed upon the lessor by Section 53 (c) of
the Registered Land Act “where only part of a building is leased”. Under Section 108 (B) (f)
of the ITPA< if the lessor does not effect the repairs within a reasonable time of notification,
the lessee may do so and deduct the expenses incurred from the lessor or rent payable.

Obligations of the tenant

Duty to pay the rent reserved
It is the obligation of the lessee to pay the rent reserved. Such rent continues to be payable
irrespective of occupation. Under Section 54 (a) of the Registered Land Act, the lesee is
bound “to pay the rent reserved by the lease at the times and in the manner therein specified.”
Section 108 (B) (1) of the ITPA is emphatic that “The lessee is bound to pay…rent to the lessor or his agent…”.
Unless otherwise provided, rent is payable in arrears

Duty to pay rates and taxes

The lessee is bound to pay all rates and taxes except where the landlord is under a statutory
obligation to do so. This duty is embodied in Section 54 (b) of the Registered Land Act.
However, under the Valuation for Rating Act Cap 266, rats and taxes are payable by the
registered proprietor.
Duty not to commit waste
The lessee is duty bound not to commit waste i.e. he must not reduce the value of the
reversion. Fixed term tenants are liable for voluntary and permissive waste. Thus if the
tenancy makes no provision for repairs, the tenant must maintain the premises in the condition
in which he took it. Under Section 55 of the Registered Land Act, the lessee must keep the
premises “ in such state of repair as that in which a prudent owner might reasonably be
expected to keep his property…”
Duty not to transfer, change, sub-let or part with possession.
Generally, the lessee must not transfer, change, sub-lease or otherwise part with possession of
the lease premises without previous written consent of the lessor. Section 54 (h) of the
Registered Land Act embody this duty. However, under Section 62 (1) the proprietor of a
registered lease is free to sub-lease for any period less than the remainder of the period of his
lease.
Although Section 108 (B) (j) of the ITPA confer upon the lessee the right to transfer or sub-let the whole or any
part of his interest in the property, his obligations to the lessor are not extinguished.

Duty to permit the Landlord view the condition of premises

It is the duty of the lessee to enable the lessor appreciate the condition of the leased premises.
The obligation is usually implied where the landlord is under an obligation to repair the
premise. The landlord must do so at a convenient time after reasonable notice otherwise he
may be liable for trespass.
Section 54 (f) provides inter alia that the tenant will “…permit the lessor or his agent…to enter on the leased
premises and examine their conditions.”

Duty to make reparation for any breach

It is the duty of the lessee to repair make good any defect or breach of agreement for which he
is to blame provided notice has been given by the lessor. Reparation must be made within
such reasonable time as may be specified by the notice. Under Section 108 (B) (m) of the
ITPA, the lessee is bound to make good any defect within 3 months of the notice or leaving.
Duty to make material disclosures
The Lessee is bound to disclose any external interference by third parties or any action he is
about to take which affects the value of the premises.
Under Section 108 (B) (k) the lessee must disclose to the lessor any fact as to the nature or extent of the interest
he is about to take, which the lessor is unaware of and which materially increases the value of such interest.

Duty not to erect fixtures

Under Section 108 (B) (p) of the ITPA, the lessee “must not without the lessor’s consent erect
on the property any permanent structure, except for agricultural purposes”.

Duty to put the landlord in possession

It is the duty of the lessee at the expiration of the lease to put the lessor in possession of the
lease premises.
Under Section 108 (B) (q) “on the determination of ht lease, the lessee is bound to put the lessor into possession
of the property”.

REMEDIES FOR BREACH OF CONTRACT

Remedies of the Landlord

Distress for rent
This is the landlords primary remedy for non payment of rent. The right of the landlord to
levy distress is regulated by the Distress for Rent Act cap 293. This Act enables the landlord
or a certified bailiff to enter the demised premises and seize and sell any chattels found
therein including those of a stranger except:
Government property
Goods used in the tenants trade
Perishable goods and linen
Chattels belonging to lodges and sub-lessors if declared in writing

The lessor must proceed within 6 years of default. If rent is owing at the end of the lease, the landlord has only 6
months failing which he must seek other remedies. The lessor may not break open any doors, windows at …in
the premises unless the goods are hidden elsewhere. If a break in must take place, he must be accompanied by a
police officer above the rank of sub-inspector.

Illegal distress is trespass and gives rise to damages. If after distress the tenant does not pay the rent due, the
landlord may sell the chattels to recover his money and costs.

Action for money

This is the right of the lessor to sue the lessee for the recovery of the rent due. The action
must be commenced within 6 years of default or the date when rent was acknowledged to be
due.
Damages
The principal remedy of the landlord for breach of other obligations is an action for damages. The amount
recoverable is usually based on the extent to which the reversion has been diminished by the breach.

Injunction:
This equitable remedy is available to the lessor to determine the breach especially if
continuing.
Forfeiture:
This remedy is available to the landlord in extreme circumstances. It involves the termination
of the tenancy relationship.

Remedies of the tenant

The tenant remedies for breach of the terms of the lease and implied covenants by the
landlord lie mainly in an action for damages and in other circumstances, repudiation of the
agreement.

TERMINATION OF TENANCIES

A tenancy relationship may be brought to an end or terminates in the following ways:

By Notice
This method is applicable where
The tenancy does not prescribe a date for termination or
Either party intends to terminate the lease before the agreed period. In the case of periodic tenancy, length of
notice is one half the duration.
The notice must be appropriate and sufficient to manifest intention to terminate the lease. The notice may be
given to the landlord or his agent or through registered post.

The notice must relate to the entire premise demised. The lease determines on the expiration of the notice.

Expiration (lapse of) or effluxion of time

All fixed term leases generally terminate upon expiration of such time. Under Section 64 (1)
(a) of the Registered Land Act, a lease determines “where the period of a lease has expired.”
Forfeiture:
This is the right of the landlord or lessor, in the event of certain breaches, to re-enter the
demised premises and thus prematurely terminate the lease. The right is only exercisable:
Pursuant to a forfeiture clause
Generally, leases contain clause specifying the breaches for which the landlord may re-enter the premises.

Pursuant to statutory, in the absence of an express stipulation. Under section 56 (1) of the Registered Land Act
and Section 111 (g) of the ITPA the right is exercisable if the lessee:

Commits any breach of, or omits to perform an express or implied condition.

Is adjudicated bankrupt
Being a company goes into liquidation
Becomes insolvent

Written notice of forfeiture must be given. Such notice must specify the breach and the remedy required. Under
the Registered Land Act, the right of forfeiture is only exercisable if the tenant fails to make money
compensation.

However, a landlord entitled to forfeit the lease is deemed to have waived his right to do so by:
Acceptance of rent which has become due since the forfeiture
Distress for rent
Any other act showing intention to treat the lease as subsisting.

The right is exercisable by either:

Peaceable entry if the premises is empty
An action for ejectment.

The effect of forfeiture of a lease is to determine every sub-lease and every other interest appearing in the
register relating to the lease.

Surrender:
This is the giving up by the tenant to the landlord of his interest in the premises. Express
surrender is effective. The surrender must be made in a prescribed form executed by the
tenant. Surrender may be implied where the tenant gives up possession and the landlord
assumes possession in circumstances which show that the relationship has been terminated.
Merger
Under Section 111 (d) of the ITPA, a lease of immovable property determines in the case of
interests of the lease and the lessor in the whole of the property become vested at the same
time in one person in the same right. Under Section 44 of the Registered Land Act, mergers
must be express.

Conversion
A lease determines if the lessee converts the lease to some other interest, e.g. freehold by due
compliance with the law.
Enlargement

LICENCES
In the words of Vaugham C J in Thomas v Sorrell (1673)

“a dispensation or licence properly passeth no interest nor alters or transfers property in

anything but only makes an action lawful, which without it had been unlawful.”

Under Section 3 of the Registered Land Act licence “means a permission given by the
proprietor of land or a lease which allows the licence to do some act in relation to the land, or
the land comprised in the lease which would otherwise be a trespass, but does not include an
easement or a profit.”

A licence creates no proprietary interest in land at all. It is nothing but permission granted by
one party to another to enter upon the grantors land or lease.
A licence need not be by deed or be registered.
A licence in general is not transferable hence a purchaser with or without notice is not bound
by it, unless such licence is created by estoppel or the licensee lodges a caution.
Whether a transaction is a lease or licence depends on the total circumstances of the case.
Licences are terminable at any time.

RIGHTS IN ALIENO SOLO

Since property confers certain powers exercisable by the proprietor, the proprietor has
capacity to impose burdens or encumbrances upon himself or his own land. This is effected, a
transaction which confers upon the other party substantial rights on the proprietor’s land.
These transactions are either mortgages recognised by the ITPA or charges recognised by the
Registered Land Act.

MORTGAGES AND CHARGES

The classical definition of the term mortgage was given by Lindley J in Santley v Wilde (1899)

“…is a conveyance of land or an assignment of chattels as security for the payment of a debt or the discharge of
some other obligation for which it is given.”

Characteristics of mortgages whether chattel or land include:

the conveyance of title
a proviso to reconvey upon repayment on due dates.
The mortgagor’ equitable right to redeem the property after the contractual right has expired. This right cannot
be taken away by express covenant or conveyance. It was held in Kreglinger v new Patagonian Meant and
Cold Storage Co. Ltd. (1914).
Under Section 30 of the Registered Land Act, charge means “an interest in land securing the payment of money
or moneys worth or the fulfilment of any condition and includes a sub charge and the instrument creating a
charge”.

Under Section 64(4) of the Registered Land Act, no title to land passes. It is a security only. The chargee has no
right to possession. This is embodied in Section 80 of the Registered Land Act. Under a charge repayment of
the amount due discharges the charge, there is no conveyance and chargees have not right o foreclose.
With mortgages upon repayment of the loan, the property is reconveyed to the mortgagor. The mortgagor has
the legal and equitable right to redeem the property. The legal right to redeem is exercisable during the
contractual period of repayment.
The equitable right to redeem is exercisable after the expiration of the contractual period of repayment.
Equitable right to redeem differs from equity of redemption, which is the residual right the mortgagor retains in
the property after legal title has passed to the mortgagee. However, it is subject to reconveyance to the
mortgagor. This is the equitable title of the mortgagor. This title confers upon the mortgagor the equitable right
of redemption after the expiration of the contractual period of repayment.

The mortgagor’s right of redemption is protected by both statutory and judicial pronouncements. Section 60 of
the ITPA embodies this right.

The essence of a mortgage is the transfer of title not possession. The mortgagee need not have possession. If he
has, he is accountable for any profit accruing.

Both mortgages and charges may be made to secure the payment of an existing, future or contingent debt or the
fulfilment of any condition. Where the repayment date is not fixed or specified, the money is payable:
In the case of ITPA mortgages, within 6 months after demand
In the case of Registered Land Act charges within 3 months after demand.

These rules apply to all categories of mortgages and charges. A mortgage or charge transaction must be in a
prescribed form or instrument and the instrument is registrable. Under the ITPA, the borrower must sign an
acknowledgement to the effect that he understands the nature of the transaction.

The ITPA distinguishes various types of mortgages namely:

Simple mortgages:
This is a transaction whereby without delivering possession of the mortgaged property, the mortgagor binds
himself to pay the mortgage – money and expressly or impliedly agrees that in the event of non-repayment,
according to the contract, the mortgagee shall have the right to cause the mortgaged property to be sold and the
proceeds applied in payment of the mortgage money.

Mortgage conditional sale:

This is a mortgage transaction whereby the mortgagor ostensibly sells the mortgage property
on condition that in the event of default the sale becomes absolute or in the event of payment
the sale becomes void. The mortgages primary remedy is foreclosure.

Usufractuary mortgage:
This is a transaction whereby the mortgagee takes possession of the mortgage property and
uses the proceeds accruing therefrom to repay himself. It is similar to a self-redeeming
pledge. The mortgagee has no power to sell or foreclose.

English mortgage
This is a mortgage transaction whereby the mortgagor binds himself to repay the mortgage
money on a specific date and transfers the mortgaged property to the mortgagee subject to a
retransfer upon payment of the mortgage money. It differs from a mortgage by conditional
sale in that it involves delivery of possession and a personal covenant to repay. The primary
remedies available of the mortgage are sale foreclosure and suit on personal covenant.
Anomolous mortgage
This is a mortgage transaction created by Section 98 of the ITPA whereby the rights of the
parties are determined by the mortgage deed.
Equitable mortgage
This is a mortgage transaction created by the Equitable Mortgages Act Cap 291 whereby the
mortgagee deposits his title deeds without delivery of possession.

Obligations of the parties

Mortgagors and chargers are bound to:

Repay the principal sum and interest
Pay all rates and taxes
Honour prior obligations if the transaction is a subsequent mortgage or charge
Keep the premises in repair
Insure the property in the joint names of the parties

In the Registered Land Act charges:

Farm according to rules of good husbandry in the case of agricultural land
Hold the property and not lease the same for a period exceeding one year without prior written consent of the
chargee.

These obligations are extinguished upon:

Cancellation of the charge by the registrar after all money due has been paid or occurrence of an event envisaged
by the charge pursuant to which the money secured ceases to be payable.
Discharge of the charge pursuant to Section 81 (1) of the Registered Land Act.

REMEDIES OF MORTGAGEES AND CHARGEES

Under the ITPA, the mortgagee is entitled to foreclosure, appoint a receiver, sale,
consolidation and suit on the personal covenant.
Under the Registered Land Act Cap 300 the chargee is entitled to appoint a receiver, sale, suit on personal
covenant and restricted right of forfeiture and consolidated.

Foreclosure:
This is a court order which bars the mortgagor from redeeming his security. This remedy is
available after the mortgage debt is due but before redemption. Under Section 67 of the
ITPA, the “mortgagee … at any time after the mortgage money has become payable to him
and before a decree has been made for the redemption of the mortgaged property or the
mortgage money has been paid or deposited as hereinafter provided, a right to obtain from the
court an order that the mortgagor shall be absolutely debarred of his right to redeem the
property..”
All persons having an interest in the property must be joined to the suit and the court may, if satisfied that the
circumstances warrant, grant an order nisi requiring the mortgagor to pay the mortgage debt within 6 months or
be barred from recovering his property. If the mortgagee fails to pay within the period, the decree becomes
absolute. The effect of foreclosure is to transfer ownership to the mortgagee. Foreclosure is not available under
the Registered Land Act.

Appointment of receiver
This right is exercisable in circumstances in which the power of foreclosure is exercisable. In
the case of the Registered Land Act, the right is exercisable where there is a default which has
been continuing for one month and if the charger does not honour a chargee’s notice in 3
months.

The appointment must be in writing and specify the income for which the appointment is
made. However, it need not be registered. Such receiver is deemed to be the agent of the
mortgagor or charger and is entitled to demand all rents and profits from the property. All
moneys received must be applied to:
Charge rents, rates and taxes
Keep down all annual sums or other payments having priority to the mortgage
Pay commissions, insurance premiums etc.
Pay interest under the mortgage or charge.

A mortgagee in possession and a chargee who has appointed a receiver has collateral powers
to grant or accept, surrender or lease or execute necessary instruments.
Statutory power of sale:
This power arises contemporaneously with the right to foreclose or with the power to appoint
a receiver in the case of charges. This power is only exercisable only if:
There is no contrary provision in the mortgage instrument.
The mortgagor’s signature is on the instrument, attested to by an advocate and the
mortgagor’s understanding of the signature.
Notice to pay has been served and not responded to in 3 months or some interest has been in
arrears for more than 2 months after due date or there has been a breach of some condition or
other than payment.
The sale may be by private contract or by public auction for mortgages and only by public
auction for charges.
The mortgage is not a trustee of the mortgagor, but the chargee must act bonafide.
Both mortgages and chargees are free to bid at the auction.
Registration of the sale discharges the mortgage or charge, transferring to the purchaser the
property free from all liabilities over which the transaction had priority.

The money realised from the sale must be applied to:

Discharge prior encumbrances
Pay expenses incurred during the sale
Discharge the mortgage or charge debt
Discharge subsequent encumbrances

The residue if any must be handed over to the mortgagor or charger.

Consolidation
This is an equitable right of a mortgagee or chargee holding several mortgages or charges
which enables him to insist that the mortgages or charges be redeemed together. This right is
only exercisable if:
The Mortgages have been executed by the same mortgagor.
All mortgages are held by the same mortgage.
There has been default in respect of all of them.
The securities were still in existence.
In the case of charges, the right to consolidate must be expressly reserved by the instrument or in one of them
and is noted in the register against all the charges consolidated.

Legal and equitable mortgages may be consolidated. In the words of Davey J in Pledge v White (1896)

“Where at the date when redemption is sought all the mortgages are united in one hand and redeemably by the
same person or where that state of things has once existed the equities of redemption have become separated.”

Consolidation is exercisable against an assignee of the mortgagor provided the right exited before the
assignment.
Suit on the personal covenant
As an alternative to foreclosure, a mortgagee may under Section 68 of the ITPA bring an action for the recovery
of money lent. The right to sue the mortgagor is exercisable if:
The mortgagor executed a personal covenant to repay
The security is destroyed as a result of the wrongful act or default of mortgagor
The mortgagor refuses to deliver possession to the mortgagee who is entitled to such possession.

RIGHT OF REDEMPTION

This is the right of the mortgagor or charger to recover his property by paying the mortgage
money or any balance owing.
Under Section 60 of the ITPA

“At any time after the principal money has become payable, the mortgagor has a right, on payment or tender at a
proper time and place, of the mortgage money, to require the mortgagee to deliver the mortgaged deed if
any…where the mortgagee is in possession of the mortgaged property to deliver possession thereof to the
mortgagor.

However, under the Registered Land Act, a charger may at law redeem before the due date, provided the
principal sum and interest due at the date is paid. Under Section 72 (3) where the charger decides to redeem
after the due date, he must give the chargee three months notice or pay three months interest in lieu. In this case,
the charger relies on his equitable right to redeem.

During the contractual period of repayment of the mortgage money, the mortgagor has the legal right to redeem.
This right is jealously guarded by law and equity. The mortgagor or charger may still exercise his right of
redemption until such time that the property is sold or a foreclosure decree is obtained.

Any government or provision which purports to deprive the charger is void. It was so held in Kreglinger v New
Paragonian Meat Company and affirmed in Saleh v Eljofri. Hence the argument once a mortgage always a
mortgage.
The right of redemption at law and in the case of mortgages in equity may be exercised not only by the
mortgagors or chargers but also by:
Executors and assigns
Any person having an interest in the property
Any surety
Any judgement creditor

PRIORITY
At common law,
The first made was first paid whether legal or equitable
Where the equities are equal, the law prevailed i.e. legal mortgages or charges take precedence over equitable
ones.

These rules are incorporated in Section 48 of the ITPA which give priority according to the date of effective
transfer, i.e.
If registration is mandatory, according to the date of registration.
If registration is optional according to the date of completion of the transfer.

EASEMENTS
Under Section 3 of the Registered Land Act Cap 300, an easement is a:
“Right attached to a parcel of land which allows the proprietor of the parcel either to use the land or another in a
particular manner or to restrict its use to a particular extent…”

The essence of an easement is that the right may be positive or negative. It is positive if it authorises one to use
another’s land in a particular way and negative if it restricts that other in the use of his land.

Characteristics of Easements
The characteristics of an easement were set out in Re: Ellanborough (1956)

Dominant and servient tenement

“There can be no easement properly so called unless there be both a servient and a dominant
tenement”.
It was so observed in Rangely v Midland Railway Co.

An easement must be connected with a dominant tenement.

Must accommodate the dominant tenement
What this requires is that the right accommodates and serves the dominant tenement and is
reasonably necessary for the better enjoyment of that tenement.
Dominant and servient tenements owned by different persons
This is because an owner can not have an easement over his own land.
In Ladyman v Grave (1871), Lord Harthery observed:

“In order to obtain an easement over land, you must not be the possessor of it, for you cannot have the land itself
and also an easement over it.”

Capable of forming the subject matter of a grant

This characteristic means that the right must be within the general nature of rights capable of
being easements. It means that rights to do a positive thing on the servient tenement is an
easement. The category of positive things is not closed; “The category of servitudes and
easements must alter and expand with the changes that take place in the circumstances of
mankind.” As was observed in Dyce v Lady James Hay.

An easement differs from a licence in that it is a proprietary interest and must be appurtenant
to land. It differs from a lease in that it does not confer any possessory rights over the land of
another.

ACQUISITION OF EASEMENTS

Easements may be acquired in the following ways:

By Statute
The Public Roads and Roads of Access Act confer upon the minister power to create or
dedicate an existing road of access as a public road. Under Section 9, and individual can
apply for permission to construct a road of access over other people’s land if no reasonable
access exists between his land and a public road or railway.
By express grant or reservation
Under Section 94 (1) of the Registered Land Act, the proprietor of land or lease may by an
instrument in a prescribed form given an easement over his land or land comprised in his
lease to the proprietor or lessee of other land for the benefit of that other land.
The instrument creating the easement must specify:
The nature of the easement granted.
The duration of the easement.
Any conditions or limitations affecting enjoyment
The tenements involved in that grant
The grant or reservation of an easement is completed by registration as an encumbrance in the register. An
easement granted by a lease can only exist during the subsistence of the lease.

Under Section 94 of the Registered Land Act, apart from the rights of way and water subsisting at the time of
registration, the grant or reservation of an easement over land governed by the Act cannot be implied. Hence the
rule in Wheeldon v Burrows (1879) does not apply.

Rights of way and water are overriding interests under Section 30. However, the doctrine of implied grants or
reservations including the rule in Wheeldon v Burrows apply under the ITPA subject to the Common Law
qualifications that since the grant is normally construed against the grantor, courts are slow to imply a
reservation in his favour. A grant in favour of the grantee is readily implied. Rights arising from an implied
grant include:
Easement of necessity
Intended easements
Easements within the rule in Wheeldon v Burrows.

The rule in Wheeldon v Burrows is concerned with the determination of what easements ought to be implied in
favour of the grantee of one part of land against the owners of the remainder. The general rule is that when the
tenements were originally in common ownership, the grantee of one part must be permitted the enjoyment of all
the facilities which the grantor found necessary for the effective enjoyment of that part. Under this rule will pass
all quasi-easements which:
Continuous and apparent
Were necessary for the reasonable enjoyment of the land granted
In either case had been and were at the time of grant being used for the benefit of the part granted.

By prescription
Under Section 32 of the Limitation of Actions Act Cap 22, 20 years of occupation gives rise to a right in the
nature of an easement, nec vi nec clam nec precario. However, the right does not take effect until a copy of a
judgement establishing its existence is registered against the servient tenement pursuant to Section 94 of the
Registered Land Act.

EXTINGUISHMENT OR DETERMINATON OF EASEMENTS

Easements may be extinguished or come to an end in any of the following ways:

Release or abandonment
At Common Law, the release or abandonment must be by deed unless the servient owner in reliance on an
agreement to release has so altered his position that it will be unjust to regard the easement as continuing in
which case equity dispenses with formalities to hold the dominant owner to his bargain. If abandonment is
alleged, the surrounding circumstances of non-user must be looked at to determine intention of not resuming the
user.

Unity of seisin
Acquisition of full ownership in both the dominant and servient tenement destroys all
easements. Where only a lease is acquired in one of the tenements, the easement is merely
suspended and subsists if at the end of the interest the tenements are owned by different
persons.
By eflluxion of time
Under Section 97 (2) (a) of the Registered Land Act, upon application of any person affected
by the easement, the registrar may cancel registration of an easement if satisfied that the
period of time for which it was intended to subsist has expired.
By occurrence of an event
The registrar is empowered to cancel the registration of an easement upon application by the
party affected, if he is satisfied that the event upon which it was intended to determine had
occurred.
By merger of interest
Under Section 44 (c) the Registered Land Act, an easement determines if the dominant and
servient tenements vest in the same person, provided:
The tenements are combined i.e. brought under one registered title
A declaration of merger is recorded on the register.

By judicial discharge
Under Section 98 (1) of the Registered Land Act, the court is empowered upon application by
the person interested in the land affected by an easement to by order extinguish the easement,
if satisfied that
The easement is obsolete by reason of changes in the character of the property, the neighbourhood or any other
material circumstances
The easement impedes public or private development without giving any practical benefits to the dominant
owner
The discharge will not injure the dominant owner.

However, the court is not bound to grant a full discharge if a simple modification sufficed.

PROFIT APRENDRE
Section 3 of the Registered Land Act Cap 300 defines a profit as

“the right to go on the land of another and take a particular substance from that land, whether the soil or products
of the soil.”

Therefore, a profit aprendre enables the grantee to take something capable of ownership from the other person’s
land. A profit differs from an easement in that:
Owner enjoys possessory rights over it and can maintain an action for trespass or nuisance for its infringement.
Whereas an easement can be acquired by an indefinite and fluctuating class of persons, a profit cannot.

Acquisition of Profits
Express Grant
Under Section 96 (1) of the Registered Land Act,

“the proprietor of land or a lease may, by an instrument in the prescribed form, grant a profit.”

Under Section 96 (2) of the Act, the instrument must specify whether it is enjoyed:

In gross or as appurtenant to other land or a lease

By the grantee exclusively or by him in common with the grantor

The grant is completed by:

Its registration as an encumbrance in the register of land or lease

Its registration in the property section of the register of land or lease if appurtenant thereto
Filling the instrument

The grant of a profit cannot be implied since the rule in Wheeldon v Burrows does not apply to profits.

Prescription
At Common Law, a profit may be acquired by prescription but is only effective after
registration unless it was obtained before the first registration in which case it becomes an
overriding interest. Profits are transferable and can be dealt with as any other property.

Extinguishment or determination of profits

Unity of Seisin
This is a situation whereby the owner of the profit acquires ownership of the servient
tenement.

Release
Under Section 97 (1) of the Registered Land Act upon registration of an executed release
from, the registration of a profit is cancelled.

Alteration of the dominant tenement

If a profit is appurtenant to land, any unrevocable alteration in the nature of the dominant
tenement raises a presumption in favour of extinguishments.

RESTRICTIVE COVENANTS OR AGREEMENTS

This is an agreement by which a proprietor undertakes to restrict the use of his land in a
particular manner, for the benefit of some other land. Restrictive covenants or agreements
may arise between:
Landlords and tenants
Owners of adjoining fee simple or absolute estates

It therefore follows that the creation, enforcement and determination are governed by the Law
of Tenancies and the Law of Contract.

Creation of Restrictive Covenants

As a general rule, a restrictive covenant or agreement cannot be created by parol.

Under the ITPA, a contract creating a restrictive covenant need not be under seal. This is a consequence of the
Common Law rules enunciated in Tulk v Moxhay (1848)

Under Section95 (3) of the Registered Land Act, a restrictive covenant must be in a prescribed form and
becomes effective when registered. Discriminative restrictive covenants or agreements are void ab initio

The existence of privity of estates only denotes a relationship of landlord and tenant between parties not privy to
the tenancy agreement e.g. a situation where the original tenant being the covenantor, or his landlord assigns his
interest to a third party. In such a situation, enforcement is governed by the rule in Spencer case (1583) which
is to the effect that both the benefits and the burdens of such a covenant will run at law and in equity only if the
covenant is one that touches and concerns the land of the covenantee i.e. if the nature, quality and mode of user
of the land in question would be affected by the observance or no-observance of such a covenant.

It is insufficient that some personal advantage may be derived from the covenant.

Where there is no privity of estate or contract, the general rule at Common Law is that no covenants are
enforceable:

At Common Law, an assignee of the covenantee could always enforce the benefit of a covenant provided
It was touching and concerning the land.
The covenantee had a legal estate in the land benefited
The assignee was the owner of the same estate as the covenantee

In equity, the burden of a restrictive covenant could be enforced under the rule in Tulk v Moxhay provided:

It was the common intention of the parties that the covenant should benefit the land of the covenantee. This
means that there must be a relationship of dominancy and serviency between the tenements involved.
The assignee of the covenantee must show that the benefit of the covenant has passed to him. Therefore, if he
only acquires part of the original tenement, he must show that the covenant was specifically annexed to that part
of the land.
the servient tenement has not passed to a bonafide purchaser for value without notice. Where privity of contract
does not exist, Section 95 (4) of the Registered Land Act applies and unless a contrary intention appears in a
restrictive agreement or covenant.

“…not only the proprietors themselves but also their respective successors in title shall be entitled to the benefit
and subject to the burden of it respectively…”

The effect of this provision is to make all the benefits and burdens of restrictive covenants enforceable at law
provided the land is registered and the covenant is noted on the register, hence a bonafide purchaser for value
without notice is not protected.

Extinguishment or Determination of Restrictive Covenants

According to Cheshire

“The covenantee (including his assignee) is deprived of his right to enforce the covenant if he has submitted to a
long course of usage wholly inconsistent with its continuance as when he remains inactive for a considerable
time while open breaches of the covenant are taking place, if he disregards breaches in such a way as to justify a
reasonable person in believing that future breaches will be disregarded of if the character of the neighbouring in
which the protected property lies is so entirely altered that it would be inequitable and senseless to insist upon
the rigorous observance of a covenant that is no longer of any value.”

These rules apply in all ITPA transactions.

 REINFORCING QUESTIONS

The common law conception of land is expressed by the maxim “cujus est solum, ejus est usque ad coelum et
ad inferos”
What is meant by this Maxim and to what extent has the principle been modified by statute law in Kenya?

Identify the salient exceptions to the common law maxim of quic quid plantatur solo solo cedit.

What do you understand by rights in alien solo? Illustrate your answer with specific examples.

Distinguish between:
fee simple and estate pure autre vie
equitable and emoviolating waste

What do you understand by “absolute proprietorship”

Mzee Koki who owned 10 acres of land in Karachuonyo died in 1956. He had five wives and 20 children. Al
his wives, namely, Atieno, Adhiambo, Awuor, Mildred and Jacinta cultivated the same piece of land for many
years before and after Mzee Koki’s death. Atieno, the eldest widow of Mzee Koki insists that the 10 acres
belong to her. Mzee Koki had other smaller pieces of land for the other wives. A group of Luo elders have
already resolved the sipute in favour of Atieno. Recently, Atieno had the land registered in her name under the
Registered Land Act, Cap 300. Mzee Koki’s other widows have refused to vacate the land and Atieno is
aggrieved. Advise her.

Identify and explain the salient essentials of leaseholds.

What is a tenancy at sufferance?

By a written agreement for lease dated June 2nd 1995, Jip Ltd. demised a shop to Sub Ltd. for 6 years. Sub Ltd.
took possession of the shop thereafter and paid the agreed rent. Unfortunately, Jip Ltd. forgot to register the
agreement as required by law. The 6 years have now expired but Sub Ltd. has refused to give up possession of
the premises. Advise Jip Ltd.

Describe the principal obligations of the lessor and demonstrate how the lessor enforces his rights in the event of
default.

Examine the circumstances in which a tenancy is terminable by forfeiture.

What do you understand by “mortgage”?

Identify and explain the various categories of mortgages recognised by the provisions of the Indian Transfer of
Property Act.
Examine the salient obligations of mortgagors and chargers.

Distinguish between “equitable right to redeem” and “equity of redemption”

Describe the remedies available to the mortgagee or chargee in the event of default by the mortgagor or charger.

Distinguish between an easement and a profit aprendre.