Commercial transactions

28th October, 2022

ALL statues are allowed in the exam room

Agency
An agent is a person who negotiates and concludes a commercial or business
transaction on behalf of someone else called the principal. The main examples of
agents these include, travel agents and estate agents, insurance brokers, auctioneers
and lawyers.

It is an established principal of law that a person cannot acquire rights under a

contract unless he is a party to that contract. This is what is known as privity of
contract however, where a person is acting on behalf of a principal the actions of the
agent as recognized as actions of a principal

They are recognized by law to affect the legal rights legal liabilities and relationships
of the principal. Please read Cavemont natured bank vs amaka agricultural holdings
limited. 2001- the SC held where an agent in making a contract, discloses both the
interest and the names of the principal on who’s behalf he purports to make a
contract. The agent as a general rule is that the agent is not liable. Where an agent
enters into a contract on behalf of a contract, it is the principal who is liable under
that contract and not the agent.

Consent

Agency by Operation of Law

There are certain instances where the law recognizes a number of people as agents
although they do not bear the title of agents. We will discuss 4 instances

1. Company directors and other officers

Agency of necessity:
For a person who acts in an emergency eg to preserve the property or interest of
another may be treated as an agent of necessity with the result that his actions would
be deemed to have authorized even if more action or authority would have been
given. Agency of necessity is one of those circumstances where there is no authority
given by the people.
Note : an agent of necessity only arises in extreme circumstances where there is
actual and definite commercial necessity for the actions of the agent. It only arises in
extreme circumstances and there must be actual and definite commercial necessity
for the actions of the agent.
The following requirements must be satisfied by an agent for an agency of necessity
to exist;
a. There must have been a genuine commercial emergency
b. As a result of the emergency, it must have been practically impossible for the
agent to obtain instructions from the principal.
c. The agent must have acted bona- fide in the principal’s interest and not his
own interest.
d. The agent must have acted reasonably in all the circumstances.

These four requirments- it becomes obvious that with modern technology methods. It
is very rare in today’s world that an agent can establish the second requirement.
Infact agency of necessity is common in situation is common in situations of courage.
As a matter of fact it is universaly accepted that a captain of a ship may take such
action in relation to the ship or its cargo in an emergency as he deems appropriate for
the purpose of preservation.

16th November 2022

Order 53

18th January, 2023

Credit consists of either buying something and being given time to pay for it or
borrowing money and paying it back later so the person giving the credit (the
creditor) is providing service which the borrower or debtor is usually required to pay
the money with some form of interest.

Credit plays an important role in the world of commerce, and there are various types
of credit one of the most important are
1. Hire purchase
2. Conditional sale
3. Credit sale
4. Bank loans- loans as such and also overdraft
5. Credit cards.

Eg a sale of goods transaction- someone who owns a shop. A seller of goods may
borrow money from his bank to finance the expansion of his business so that he can
obtain the buyers Order and supply the goods

The bank loan is a form of credit, so that seller, the person who owns the shop will
use credit when he or she borrows money from the bank.
The buyer of goods- may be unwilling or unable to pay for the goods in advance or on
delivery of the goods so that buyer of goods may require a period of credit from the
seller. So the seller may provide credit to themselves by deffering payments or
accepting payments by means of bill of exchange. In a situation where a buyer is
unwilling or unable to pay for the goods that buyer may require a period of credit
from the seller and the buyer may. Lay by, when you are unable to pay for the goods
in cash you will be allowed to do lay by. You as a buyer have been given credit by the
shop.
You walk into the shop, you buy goods and the seller agrees payment by a post dated
cheque, by means of a bill of exchange which is payable at a future date.

No matter who provides credit or how it is provided, the creditor will usually require
some form of security for example, the seller may reserve title in the goods. The
creditor will require some form of security. The example of lay by- when you do a lay
pay, the store reserves title in the goods. You are not allowed to take the goods. They
are retained in the shop until you make full payment. The seller reserving title in the
goods is a form of security

A bank- provides you with lease financing to purchase a car the white book of the car
will be in the name of the bank. The fact that the white book is registered in the
name of the bank is a form of security because the bank is reserving title in the motor
vehicle.

The seller may demand that payment be by irrevocvable documentary credit. This is a
form of security.

The lender, a bank or financial institution may require any other security belonging to
the borrower. The lender may require security over immovable property. Again this is
a form of security. Immovable properties securities act- was enacting to enable small
businesses who may not have property to enable them to borrow from the bank
How agricultural charges are created under the agricultural creations act- agricutraul
charges are a form of security by a borrowed.
- May ask for 3rd party guarantee’s
- Security is provided by the borrower

Credit is simply a form of financial accommodation

- Credit is the provision of a benefit such as cash, land goods, services or
facilities for which payment is to be made by the receiptient or data or
borrower in money at a later date
- As already stated, the price payable to the creditor is interest at an agreed
rate.

Forms of credit
1. Loan credit
Is granted where money is lent to the debtor or borrower on terms that it must be
repaid to the creditor together with interest in due course. Examples of laon credit
are a bank laon or a bang overdraft
2. Sale credit
Granted where the debtor or borrower Is allowed to deffer payment of the price of
goods and services supplied. In other words the goods or services have been supplied
but the borrower or buyer does not make payment immediattly
3. Fixed sum credit
Granted where the dedtor receives 6 months of credit which must be paid in a
lump
4. Revolving credit
Granted where the debtor is allowed a credit facilitiy which he or she mat drae in

8th February, 2023

Finance agreements: UNIT 7 of the module

the lending mechanics and in particular key clauses in a loan agreement.

Term facility
Permitted purpose
Draw down notice or utilization request.

Conditions precedence- eg borrower is a shop, the lender will want to ensure that the
borrower has a trading license which is current.

When it comes to repaying the loan, the repayment may be by a signal or bullet
repayment at the end of the day. It might be agreed that repayment be made at the
end of the term. Eg borrower borrowed on 1 st august, 2022. The term laon is for the
period of 1 year from first august to terminate on 1 st august, 2023. So the parties
might agree that repayment will be by one singla payment of the whole amount
including interest on the 1st august, 2023. That is what is known by a bullet
repayment.

Usually, repayment will be according to an amotization schedule, regular payments

which will operate during the term of the loan. Eg if it is a term of 3 years the parties
might agree to monthly payments of an agreed sum and the installment sums would
have been agreed parties.

Repayment holiday- what this means is that after the loan is drawn down, repayments
will only begin after the repayment holiday has ended. If the repayment is 3 months
the borrower will not be obligated to return the payments until after 3 months from
the date of draw down.
Balloon repayments- payments will be regular, monthly or quarterly, the parties will
agree that the regular payments will be sums of say 500,000 kwacha but the last
payment will be a balloon payment which will be larger than the regular payments. Eg
the last payment will be 1 million while the quarterly payments were 1000 kwacha.
Balloon repayments simply means that payments towards the end will be much more
that the regular payments which the borrower will be making.

The holiday, enables goods to come in and enable the borrower to start selling the
goods because the money the borrower will pay back to the lender will come from the
money from the goods sold.

Revolving facility- there is an understanding that each short-term advance must be

repaid at the end of each term. Each short-term loan will be paid at the end of that
particular day.

Rollover mechanism- the money owed is effectively rolled over

Voluntary Pre-payment
Borrower must ensure that there is a clause in the agreement to make prepayments.
The issue of prepayment is really only a real issue for term loan facilities.

Conditions for voluntary prepayment.

Interest period ends on 31 December, the borrower makes a prepayment on the 15 th

of December, this means that the lender has lost out on interest payable on that
amount from 15th to 31st December, the lender is entitled to charge the borrower who
makes a prepayment. An amount of money which is known as a break cost which will
be the compensation for the loss suffered by the lender.