SCHOOL OF LAW

BACHELOR OF LAWS
END OF SEMESTER EXAMINATION
SLS 2219: COMMERCIAL LAW

DATE: Friday, 25th March 2022 Time: 2 Hours

Instructions

1. This examination consists of FOUR questions.

2. Answer Question ONE (COMPULSORY) and any other TWO questions.

QUESTION ONE [MANDATORY]

a) In July 2021, Householding Limited held discussions with Faraja Enterprises in relation to
the supply of corrugated iron sheets (commonly referred to as ‘mabati’) by the former to the
latter. Following those discussions, Faraja Enterprises issued a Local Purchase Order (LPO)
in August 2021 to Householding Limited for the supply of ‘mabati’ sheets valued at Kshs.
10 million. Pursuant to the said LPO, Householding Limited proceeded to supply ‘mabati’
sheets worth Kshs. 10 million to Faraja Enterprises in September 2021.

Amongst other terms, the parties had agreed that any goods supplied by Householding
Limited to Faraja Enterprises would be paid for within thirty days of delivery. However, as
of December 2021, Faraja Enterprises had not paid any sums of money despite receiving
requests from Householding Limited to pay them Kshs. 10 million. Feeling frustrated and
aggrieved by the outcome of events, Householding Limited proceeded to file a case seeking
judgment from the court to the effect that Faraja Enterprises be ordered to pay them the sum
of Kshs. 10 million in respect of the ‘mabati’ sheets, together with interest thereon at the
prevailing commercial rates.

In their defence to the suit, Faraja Enterprises deny any wrongdoing on their part and aver
that the goods supplied were sub-standard and of poor quality, thus were supplied in
contravention of the provisions of the Sale of Goods Act, Chapter 31 of the Laws of Kenya.
They further argue that an LPO is insufficient to create a contractual relationship as it is
simply an offer and therefore, the parties never entered into a valid sale of goods contract.
They further argue that even if it was to be held that there was indeed a sale of goods contract
between the parties, they had not previously examined the goods and thus according to the
provisions of the Sale of Goods Act, they cannot be deemed to have accepted the goods

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 unless and until they had been given a reasonable opportunity of examining them for the
purpose of ascertaining whether they were in conformity with the contract.

Considering the provisions of the Sale of Goods Act and with the aid of relevant case law,
prepare a concise brief on the decision that you would make if you were adjudicating the
case. [20 marks]

b) ‘Although nemo dat quod non habet remains an important rule in Commercial Law, the
exceptions to it have become so numerous as to remove the strictness of the rule.’ Discuss.
[10 marks]

QUESTION TWO [15 marks]

Mwabonje entered into a hire purchase agreement with Jaribu Capital in August 2019, in respect
of a Toyota Hilux pick-up. The cash price indicated for the pick-up was Kshs. 3,500,000.00. The
hire purchase agreement was validly entered into and fulfilled all the requirements of the law.

Sometime in June 2021, after Mwabonje had paid hire purchase instalments amounting to Kshs.
2,900,000.00, Jaribu Capital proceeded to repossess the pick-up from Mwabonje owing to the
fact that various cheques issued by Mwabonje for payment of the monthly instalments had been
dishonoured upon presentation to the bank. Further, Jaribu Capital claim that they caught wind
of the fact that Mwabonje was planning to sell off the pick-up to a third party without their
knowledge or approval. They therefore sought to safeguard their interests by repossessing the
pick-up from Mwabonje and selling it off to a third party. They do not dispute the fact that
Mwabonje had paid them more than two-thirds of the hire purchase price.

Mwabonje feels aggrieved by the actions of Jaribu Capital and files suit in court seeking recovery
of all the sums of money paid to the latter together with interest thereon, on the grounds that
Jaribu Capital was in breach of the hire purchase agreement and the law.

On their part, Jaribu Capital deny any wrongdoing and in turn file a counter-claim against
Mwabonje, seeking damages in the sum of Kshs. 600,000.00. It is their contention that Mwabonje
was the one in breach of the hire purchase agreement between them, by failing to honour his
instalment payment obligations and attempting to deal with the hired goods in a manner that is
inconsistent with Jaribu Capital’s proprietary interests.

The judge handling this case has requested you, being the legal researcher assigned to his court,
to prepare a draft judgment for his review and consideration. Using the relevant laws applicable
in this case, prepare a concise brief setting out your decision. [15 marks]

QUESTION THREE [15 marks]

While she was a guest residing at the prestigious Palms Hotel in Watamu, Thandi left a valuable
ring with the reception attendant at the hotel, with instructions for the ring to be delivered to a
renowned jeweller in Malindi for polishing and resizing. The reception attendant agreed to carry
out Thandi’s request but subsequently lost the ring, so it was never delivered to the jeweller. The
attendant never reported the loss of the ring to either his employer, or to Thandi.

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Thandi subsequently sued Palms Hotel as the bailee of the ring, arguing that she had delivered
possession of the ring to the hotel’s employee for the purpose of having it delivered to the
jeweller. She seeks damages in the sum of Kshs. 1,200,000.00.

On its part, Palms Hotel argues that in order for a bailment relationship to exist, there must be a
mutual agreement between the parties and since the hotel had never consented to become a bailee,
it cannot therefore be held responsible. The hotel also argues that because it did not know the
value of the ring in question, it was therefore not a bailee for Thandi. The hotel further argues
that it received no consideration or benefit for taking care of the ring and thus a bailment
relationship cannot have arisen.

This matter has come before you as the sole arbitrator, for consideration and determination.
Having heard the respective arguments of the parties and considering the applicable laws and
legal principles, prepare a concise brief setting out the decision that you will make in this case.
[15 marks]

QUESTION FOUR [15 marks]

a) Discuss the standard form contracts of sale of goods that are usually used in import and export
trade. Ensure that you address the aspect of passing of property in the goods in each case.
[10 marks]

b) “While an agency must ultimately derive from consent, the consent need not necessarily be to
the relationship of principal and agent itself (indeed the existence of it may be denied) but it
may be to a state of fact upon which the law imposes the consequences which result from the
agency.”  Lord Wilberforce

In light of the above statement, discuss the issue of consent in agency relationships.
[5 marks]

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