Business and Company Law Paper 5

Solution 2
Issues:
(i) Whether it was lawful not to register Tulina’s charge with the registrar of
companies by Konka Ltd.
(ii) Whether the company officer’s authentication of Tulina’s charge was lawful.
(iii) Whether Byansi’s instruction to the company officer was lawful.
(iv) Whether Ndofu was justified to prevent Sawa from speaking and voting on Doga’s
behalf.
(v) Whether there are any remedies available for the aggrieved parties.
Resolution of issues:
(i) Section 106 (1) of the Companies Act 2012 provides that it shall be the duty of a
company to send to the Registrar for registration particulars of every charge
created by the company and issue of debentures.
Section 106 (3) of the Companies Act 2012 further provides that if a company fails
for 42 days to send to the Registrar for registration the particulars of any charge
created by the company or of the issue of debentures requiring registration, then
every officer or other person who is a party to the default is liable to a default fine
of 50 currency points.
In this case, Tulina created a charge on some of Konka Lad’s assets a year ago,
and the company intended to sell off one asset upon which Tulina had a charge.
Tulina found out that his debenture details were missing from the Registrar
General’s records and on further inquiries from the company, it was revealed that
his charge was recorded by the company secretary but no further action was taken
thereafter. This was against the provision of the law.
Therefore, it was unlawful for Konka Ltd not to register Tulina’s charge with the
Registrar of Companies.
(ii) Section 59 of the Companies Act 2012 provides that a document requiring
authentication by a company may be signed by a director, secretary or other
authorised officer of the company, and need not be under the company’s common
seal.
In the instant case, Tulina was informed by the secretary that the record of his
charge and related debenture holding was neither properly authenticated nor
sealed as required by law. However, the charge instrument shown to Tulina
indicated that a company officer had authorized it, on the instructions of Byansi,
who was one of the directors, and a copy of the instruction authorising that officer
was attached to the charge instrument.
Therefore, the company officer’s authentication of Tulina’s charge was lawful.
(iii) Section 191 of the Companies Act 2012 provides that the acts of a director or
manager shall be valid notwithstanding any defect that may afterwards be
discovered in his/ her appointment or qualification.
 In the instant case, Tulina was concerned about Byansi’s action of instructing an
officer to authenticate his debenture documents. According to them, it had sparked
complaints among the debenture holders. They reminded Byansi that his
appointment as director was made despite the fact that he did not fully qualify for
the position, hence, his actions may be found invalid. This was not the true position
provided by law.
Therefore, Byansi’s instruction to the company officer was lawful.
(iv) Section 143 (1) of the Companies Act 2012 provides that a member of a company
limited by shares who is entitled to attend and vote at a meeting of the company,
is entitled to appoint another person whether a member or not, as a proxy to
attend and vote instead of him/ her, and a proxy appointed to attend and vote
instead of a member of a private company shall have the same right as the
member to speak at the meeting.
In this case, Doga, a member of Konka Ltd, appointed Sawa to represent him.
However, one director, Ndofu did not allow Sawa to speak or vote on behalf of
Doga, with the view that Sawa was at liberty to listen to whatever was discussed
and later communicate to Doga about it. This was not right, according to law.
Therefore, Ndofu was not justified to prevent Sawa from speaking and voting on
Doga’s behalf.
(v) Remedies available for the aggrieved parties:
 Tulina may seek for a court order to compel Konka Ltd to register his charge
and debenture.
 Byansi may seek for a declaratory order that the debenture authentication
was valid.
 Byansi may seek for a declaratory court order that the instruction he gave
was lawful.
 Doga may seek for a court order for damages resulting from limitation of
his representation.
Solution 3
Issues:
(i) Whether the creditor was justified to demand payment of the firm’s debt from Pole
and Ntasa.
(ii) Whether Jukira firm is liable to pay for all credit purchases made by Biso.
(iii) Whether the firm’s business manager was justified not to forward money from the
sales.
(iv) Whether Jukira firm was liable for expenses of the pedestrian who was knocked
by the firm driver.
(v) Whether there are any remedies available for the aggrieved parties.
Resolution of issues:
(i) Section 13 of the Partnership Act 2010 provides that a partner is liable jointly and
severally with his/ her co-partners for everything for which the firm becomes liable,
while he or she is a partner in the firm.
In the instant case, Biso made credit purchases worth Shs 4 million, to be paid in
two months’ time but the two months passed by with no payments made. The
creditor made payment demands from Pole, who had properties in his name and
from Ntasa, whose family was wealthy, but both of them declined to pay. The law
provides that each partner can be severally liable for the firm’s debts. Therefore,
the creditor was justified to demand payment of the firm debt from Pole and Ntasa.
(ii) Section 14 of the Partnership Act 2010 provides that a firm is liable to make good
the loss , where one partner acting within the scope of his or her apparent
authority receives the money or property of a third person, and misapplies it.
In this case, Biso made credit purchases in the firm’s name but took some products
to his home and gave out some to his relatives. Some of the products had been
sold but some were yet to be sold. Despite the opinion of Gambo, Ntasa and Pole,
the products were purchased in the firm name, within the scope of Biso’s apparent
authority. Therefore, Jukira firm is liable to pay for all credit purchases made by
Biso.
(iii) Section 151 (2) of the Contracts Act 2010 provides that an agent may retain sums
received by him or her on account of goods sold, although the whole of the goods
consigned to him or her may not have been sold or the sale may not be complete.
In the facts, Jukira firm’s business manager of one branch had sold some firm
products but declined to submit the money received. The business manager who
always made transactions on behalf of the firm gave his reason for refusal to hand
over the money that in the previous year, he had not been paid for the services
rendered to the firm. Therefore, the firm’s business manager was justified not to
forward money from the sales.
(iv) It is a well established rule that a master is liable for the acts of his servant,
committed within the course of his or her employment (Tusubira Robert v Anguna
& anor. 2012).
An act maybe done in the course of employment so as to make the master liable
even though it is done contrary to the orders of the master, and even if the servant
is acting deliberately, wantonly, negligently or criminally or for his own behalf, if
what the servant did is merely a manner of carrying out what he was employed to
carry out, then his master is liable (Muwonge v Attorney General, 1967).
In this case, Jukira firm’s driver who was supposed to take products to an outlet,
stopped on the way to check on his mother. When he resumed with the journey,
he did not take care of oncoming people and knocked a pedestrian, who suffered
grave injuries. When relatives of pedestrian demanded for payment of expenses
 by Jukira firm, the partners declined to pay, claiming that the driver had gone off
the course of his duty when the accident happened. This was not in line with the
provisions of law. Therefore, Jukira firm was liable for expenses of the pedestrian
who was knocked by the firm driver.
(v) Remedies available for the aggrieved parties:
 The creditor may seek for a court order to compel any or all partners to pay
him.
 The creditor may seek for a declaratory court order that the firm was liable
to pay for all purchases.
 The firm’s business manager may seek for a declaratory court order that he
had a lien on the sales made.
 Relatives of the pedestrian may seek for a court order to compel Jukira firm
to pay expenses.
Solution 4
Issues:
(i) Whether Kiki Enterprises was justified to demand for supplies from Abacha Ltd.
(ii) Whether Gula was justified not to pay for supplies delivered by Abacha Ltd.
(iii) Whether Murife was liable to replace packaging materials sold to Abacha Ltd.
(iv) Whether the termination of Bukozi’s employment by Abacha Ltd was lawful.
(v) Whether there are any remedies available for the aggrieved parties.
Resolution of issues:
(i) Section 4 (2)(a) of the Contracts Act 2010 provides that communication of an
acceptance is complete as against the offeror when it is put in a course of
transmission to the person to whom it is made, so as to be out of the power of
the acceptor.
In this case, Abacha Company offered to supply Kiki Enterprise with supplies and
Kiki Enterprise responded positively through email to Abacha Ltd and sent a letter
with the same response. Abacha Ltd agreed to package the supplies for Kiki
Enterprise to pick in 2 or 3 days. When a representative of Kiki Enterprise went to
pick them, he was informed that Abacha Ltd was yet to receive a response from
Kiki Enterprise and could not be considered for any supplies. This was wrong, since
Kiki Enterprises had already transmitted acceptance through email and postage of
a letter. Therefore, Kiki Enterprises was justified to demand for supplies from
Abacha Ltd.
(ii) Section 26 (d) of the Sale of Goods and Supplies of Services Act 2018 provides
that unless a contrary intention appears, when goods are delivered to the buyer
on approval on “Sale or return” or other similar terms, the property in goods shall
pass to the buyer when he or she signifies his or her approval or acceptance to
the seller or does any other act adopting the transaction.
In the instant case, Abacha Ltd was supposed to deliver supplies to Gula, which it
sold on “sale or return” terms where the supplies were to be the same as the
 sample given earlier to Gula. When Abacha Ltd’s supplies were delivered to Gula,
he found that they were not the same as the agreed sample. Therefore, Gula was
justified not to pay for supplies delivered by Abacha Ltd.
(iii) According to section 47 (2) (b) of the Sale of Goods and Supplies of Services Act
2018, where the buyer requires the seller to replace or repair goods, the seller
shall bear any necessary costs incurred in doing so, including, in particular, the
cost of any labour, material or postage.
In this case, Abacha Ltd bought packaging materials from Murife and paid for
them. It was later discovered that the packaging materials were defective and
customers were complaining about their quality. The company demanded for
replacement of the materials but Murife ignored the demands on the ground that
the materials were categorized as “goods already sold”, which could not be
returned. This was against the law, since the company had a right for replacement
of defective goods. Therefore, Murife was liable to replace packaging materials
sold to Abacha Ltd.
(iv) Sections 73(1) and 75 (d) of the Employment Act 2006, termination of an
employment contract can be unfair if it is for participation or proposed participation
in the activities of a labour union outside working hours.
In this case, Bukozi an employee of Abacha Ltd always attended activities of the
workers’ labour union in his own private time. At one time, he was warned about
involvement in such unions and he was given a letter terminating his employment
last month, because of his participation in union activities. This was against the
provision of law. Therefore, the termination of Bukozi’s employment by Abacha Ltd
was not lawful.
(v) Remedies available for the aggrieved parties:
 Kiki Enterprises may seek for a court order to compel Abacha Ltd’s
fulfillment of the contract.
 Gula may seek for a declaratory order of court that he could not pay for
different supplies.
 Abacha Ltd may seek for a court order to compel Murife to replace
packaging materials.
 Bukozi may complain to the labour officer for an order to re-instate him as
an employee.
Solution 5
(a) Duties of a trustee:
(i) Reduction of property into possession: A trustee has a duty to ascertain the
trust property, to prepare an inventory for them, transfer them to himself/
herself, and where necessary, take legal proceedings in respect of the
property.
(ii) Duty to invest (S. 3 of the Trustees Act, Cap 164): A trustee invests trust
funds in his/ her custody by purchasing or doing anything from which
 interest or profits is expended, where the investment should produce
income and maintain capital.
(iii) Duty to distribute: The trustee should pay income and capital to entitled
beneficiaries under the trust. This may require advertisement (Ss. 27 & 32
of the Trustees Act, Cap 164).
(iv) Duty to maintain equality: Every trustee must act fairly and impartially for
all beneficiaries, and ensure fair apportionment of income to all
beneficiaries.
(v) Duty to account: A trustee must keep trust accounts and present them
whenever required by the beneficiaries.
(vi) Fiduciary duties: A trustee must not compete with the trust and must not
buy trust property or any beneficial interests in property, unless a court of
law orders so. The trustee must account for incidental profits of the trust.
(b) Duties of an internal auditor of a Savings and Co-operative Society (S.
55K (2) of the Cooperative Societies Act, Cap 112):
(i) An auditor must evaluate the reliability of information produced by accounts
and computer systems of the Co-operative society (S. 55 (2)(a)).
(ii) The internal auditor of a Cooperative Society has a duty to provide an
independent appraisal function for the Co-operative Society (S. 55 (2)(b)).
(iii) An auditor has a duty to evaluate the effectiveness, efficiency and economy
of operations of the Co-operative Society (S. 55 (2)(c)).
(iv) The auditor evaluates extent of compliance with laws, policies and operating
instructions governing the Savings & Co-operative Societies in Uganda (S.
55 (2)(d)).
(v) An auditor must provide services for investigations to the line management
of a Co-operative Society (S. 55 (2)(e)).
(vi) An auditor has a duty to certify returns submitted to the Registrar by the
Savings & Credit Co-operative Society (S. 55 (2)(f)).
Question 6
(a) Ways in which a bankers’ authority to pay a cheque drawn on the bank
by a customer may be terminated:
(i) Customer’s countermand: Where a bank customer gives instructions to the
bank not to honour a cheque, the bank’s authority to pay is terminated. The
bank has to return the cheque marked, “Order not to pay”.
(ii) Notice of customer’s death: Where a banker receives a notice of its
customer’s death, its authority to honour a cheque is terminated, but any
payment made before the notice is valid.
(iii) Notice of bankruptcy: When a notice of a bankruptcy petition against a
drawer is presented to the bank, the bank’s authority to pay any cheque
drawn by such a customer is terminated.
 (iv) Notice of insanity: When a bank receives a notice that the drawer of a
cheque has become insane, the bank cannot pay any of the drawer’s
cheques until he/she recovers from insanity or until an order of court for
payment is made.
(v) Receipt of garnishee order: The bank cannot honour cheques drawn against
a customer’s account after receiving a garnishee order (court order against
a debtor to pay a debt to a creditor of the creditor, who has a judgment).
(vi) Insufficient funds: Where there are insufficient funds on a customer’s
account to meet payment of the cheque, the banker cannot pay the cheque.
(vii) Assignment: A banker cannot honour a customer’s cheque when the
customer gives notice of assignment of the credit balance of his/her
account.
(viii) Holder’s defective title: Where the banker detects any defect of title of the
person presenting a cheque for payment e.g. suspected fraud or theft, it
does not pay the cheque.
(ix) Closure of account: Where a customer closed his/her account with the
banker, any cheque presented, even if issued before closure, cannot be
paid by the banker.
(b) (i) Delegated legislation: This is legislation which has the power of an Act
of Parliament, but which is passed by a competent body such as the
Minister or local authority, to whom/which Parliament delegated its law-
making authority (Article 79 (2) 1995 Constitution).
(ii) Reasons for delegated legislation:
(i) Lack of Parliamentary time: Parliament may not have sufficient time
to legislate on all aspect of national issues for efficient governance.
Parliament saves time where there are pressing problems requiring
legislation.
(ii) Urgency: Parliamentary procedure for law-making is normally slow,
yet it is not always in session to cope with all urgent issues, thus,
the need to delegate powers to a competent authority.
(iii) Technicality of subject matter: Some legislation may require experts
to handle its technical nature and as such, some legislation is best
dealt with by a minister, assisted by experts in the area of legislation.
(iv) Flexibility: Parliamentary procedure is generally inflexible. Where a
situation requires immediate repeal or amendment of an Act, it is
faster to use indirect legislation where a ministerial rule or regulation
may withdraw or amend it.