BBA 101 Business Law I PDF

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KENYATTA UNIVERSITYINSTITUTE OF OPEN LEARNINGCBABUSINESS LAW 1ELIUD .E O. OBEREDEPARTMENT OF ECONOMICSTABLE OF CONTENTPage1 General Objectives----------------------------------- ----------- --- 3 2 Lecture 1 Nature, Purpose and kinds of law.--------------------- 4- 20 3 Lecture 2 Administrative stru...

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KENYATTA UNIVERSITY INSTITUTE OF OPEN LEARNING

CBA100 BUSINESS LAW 1

ELIUD .E O. OBERE

DEPARTMENT OF ECONOMICS

TABLE OF CONTENT Page

1.0 General Objectives----------------------------------- ----------- --2.0 Lecture 1 Nature, Purpose and kinds of law.--------------------3.0 Lecture 2 Administrative structure of Kenyan Courts.---------4.0 Lecture 3 Law of Contract-----------------------------------------5.0 Lecture 4 Law of torts-----------------------------------------------

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3 4- 20 21- 33 34- 81 82- 124

General Objectives This unit aims at introducing you to the general principles of law and its application. In particular the unit discusses how this law relates to the business world. The unit is dividend into four Lectures. Lecture one introduces you to the basic concepts of business law 1. It discusses the definition of law, the nature of law and its functions. It also explains why the society needs law and how this law applies to the business transactions. It also discusses the sources of Kenyan law. Lecture two discusses the administrative structure of Kenyan Courts, their role functions jurisdictions and how the courts help in solving business problems. In particular the lecture looks at, District Magistrate’s Courts, Court of Appeal, Kadhi Courts and Court martials. Lecture three discusses basically the law of contract its objective importance, essential elements, contractual capacity of parties in a contract remedies for breach of contracts and ways and means of discharging a contractual relationship. Lecture Four discusses law of torts particularly the general law relating to torts, general defences in tort, capacity of parties in tort, vicarious liability, of action and limitation of action in tort. The lecture also discusses the legal aspect of tort in regards to trespass to person, trespass to land and trespass to goods. The lectures are divided into lessons and at the end of each lesson a question is given. This is intended to help you revise what you have learned. You are therefore required to answer these questions or discuss them with your fellow colleagues after every lesson. Lastly in the Appendix, there is a brief discussion on how to answer law questions. Students are advised to look at this section and only treat it as a guide to answering law questions. This section discusses briefly what you as a student is expected to do by an examiner before you start answering law question and what materials you are required to include when answering law questions. All cases in this lecturer are from-General principles of Law simplified by N.A.Saleemi and T.K. Ateenyi.

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CBA 100

BUSINESS LAW 1

LECTURE 1. NATURE PURPOSE AND KINDS OF LAW INTRODUCTION LESSON 1 Why you will learn At the end of this unit, the learner should be able: Understand the nature, functions of law and how law applies to the business transactions. Understand the reasons and benefits of studying business law. To understand and appreciate the role law plays in the society. Understand the source and origin of uses laws (Kenya).

What this unit is about. This unit introduces the learner to the basic concepts of business law 1. It discusses the definition of law, the nature of law and its functions. It also discusses why the society needs law and how this law applies to the business transactions. The unit also discusses the sources of law. Introduction. This lesson will introduce the learner to the nature, purpose and kinds of law. It will also discuss the characteristics of law, purpose of law and classification of law. Objectives By the end of this lesson, you should be able to: Define business and business law. Understand the importance of studying business law. Understand the characteristics of law. Lesson Activity Ref:

NATURE, PURPOSE AND KINDS OF LAW. Definition: The term law is used in various forms. There is however, no generally acceptable definition of the word "law". Different schools of thoughts and

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different personalities have tried to define law in different ways, below are some definitions we shall consider. i) A law is a rule of conduct imposed and enforced by the Sovereign State (AUSTIN). ii) Law in its most general and comprehensive sense signifies a rule of action and is applied indiscriminately to all kinds of actions whether animate or inanimate, rational or irrational. (BLACKSTONE) iii) Law is the body of principles recognized and applied by the state in the administration of justice. (SALMOND) iv) Law is a rule of external human action enforced by the sovereign political authority. (HOLLAND) v) Law is the portion of the established habit and thought of mankind, which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the Government. (WOODROW WILSON)

An analysis of the above definitions reveals the following essential characteristics of law.

Characteristics of law a) Law relates to external an internal actions of human beings - which are harmful. It does not regard harmless external actions. b) Law is enforced by the sovereign political authority - the law must be enforced otherwise there would be anarchy. The body enforcing law must be sovereign body i.e. it should not be under political, or social pressure. It must be free to enforce law with the sole objective of delivering justice. The law enforcing body is the courts. They do so by interpreting and enforcing law. c) Rule of conduct or action is necessary for peaceful living, progress and developments. The purpose of law is order, the result of order is that one is able to look forward to full enjoyment of his property and basic rights in regards to the others. The law hence must be supreme and applicable to all without fear and favor. d) Set of Rules – law is a body of rules. These rules may originate from, customs, usage's, acts of parliament, court cases and some other acceptable sources. Law changes over a period of time with the changes in human behavior. Hence law is not static. From the above, we can derive a general definition of law as. The body of rules, regulations and conducts which regulates both internal and external conduct and actions of human beings and are determined from time to time and enforced by a sovereign state or body.

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Purpose of Law Law generally is enacted for a purpose of helping bring peace of mind, harmony and good understanding amongst the members of a particular society. It hence serves: To regulate the conduct or behavior of the persons. To provide justice to the members of the society. To maintain a healthy political, economical and social stability in the society. To protect the fundamental rights and freedoms of the individuals in the society. To establish the procedures and regulations regarding the dealings among the individual in the society. Business and Business Law Business is defined as economic activity, which makes someone busy. Being an activity it must operate under a set of rules and regulations. These rules however must be such that they apply to similar business. Hence in business law we discuss the laws and regulations governing business activities and show how these activities relates to the general law of the land and to the persons doing business. The laws regulating business activities are formulated and regulated by a sovereign body or state. We may hence define business law as those areas of law, which form the legal environment within which business entities come into existence enter into business relationships, pursue their industrial and commercial activities and achieve their objectives. Why study Business Law Today a businessman is concerned with a large environment within which he must operate and the law which govern the various institutions and situations to be found in this environment, hence there is a need to understand all these laws. Businesses operate within a framework of administrative law, which influences many of the things they do. Business must observe planning, comply with health and safety at work. The study of business law will expose the businessman to i.e. administrative laws, torts, economic law, law of contract, sale of goods, the carriage of goods by land, sea, and air and employment laws among others.

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Nature of Law Law is a collection of rules concerning the society, these rules tells us "to do or not to do" certain things. Law is binding; it is made and altered by certain institutions. Law is based on - social convenience, culture and political thought. Classification of Law The law is enormous subject and hence specialization is essential. This however, makes law be classified in different ways as: International Law May be further classified into two parts. One is the law that deals with the mutual relationship between the states; it is also concerned with international organizations. This branch is called public International Law. The other branch that is Private International Law deals with the difficulties, which may arise when legal disputes occur between parties from different nations. Thus, it considers such issues as which body of laws shall be used to decide any dispute, which courts shall have jurisdiction, to whom should appeal lie, how should damages be decided, in what currency, and how shall payments be compelled? Private International Law ("conflict law"). International law civilized nations, and internationally recognized customs, international conventions or treaties, decisions of the world court and teachings of the most highly qualified publicists of various nations. Public and Private Law. Public law is generally concerned with those cases in which the state is involved, as representing the public in general. Public Law is interested in the prevention of crime, so that criminal law is actionable officially by the prosecution of offenders. Private Law includes all branches of the law, which involve disputes between citizens, where one individual has a complaint against the other. The various matters are said to be actionable at the suit of the aggrieved party. The aggrieved party is called the plaintiff who sues the defendant. Civil and Criminal Law Civil law is that law which governs the relations of individuals amongst themselves as opposed to the relations between individuals and state. Civil law includes, law of contract, the law of succession, the law of torts, the law of property. A civil wrong is a violation of the private rights of an

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individual. Successful part in civil case is awarded monetary compensation called damages. Criminal Law falls within the purview of the public law, in criminal law the state seek redress for any public wrong (crime) committed against any citizen. A crime is a public wrong the commission of which may result in the prosecution and punishment of the wrong doer. The punishment is usually by a term of imprisonment or imposition of a fine. The bulk of criminal law is contained in the Penal Code of Kenya. Crime includes theft, rape, murder, robbery etc Business laws deals in civil law matters.

Procedural Law and Substantive Law Procedural law consists of the rules which determine the manner in which the court proceedings are required to be conducted in civil law or crime is prosecuted under the criminal law. Substantive laws on the other hand consists of actual rules regarding the civil, criminal and other fields of law. It defines the civil, criminal wrongs and provides for each type of offences. LESSON 2 Introduction In the lesson we are going to discuss the sources of Kenyan law. Objectives. By the end of this lesson, you should be able - to: • Define the word source of law. • Understand the source and origin of our laws (Kenyan) i.e. constitution, legislation, • Common law and equity.

LESSON 2

SOURCES OF LAW.

Definition: Source of law may be defined as that legal rule that makes up the law. It is that legal form which a rule of law derives its force and validity, that is the will of the state as manifested in statutes or decisions of the courts. It is the material source from which the law derives the actual matters of the law.

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The source includes: i) The legal source of law (legislation, precedents) ii) The historical source of law - includes factors that have been influential in the development of the law but themselves not recognized as law. E.g. religious practice and beliefs, local customs and opinion of jurists. The source may also refer to places where the law can be found i.e. in statutes, in law reports, in text-books and decisions of court.

Section 3 of the Judicature Act (cap8) of Kenya contains the following as sources of Kenya Law: SOURCES OF KENYAN LAW 1. The constitution of Kenya and subsequent amendments to the constitution. 2. The Acts of Kenya Parliament. 3. Specific Acts of the Parliament of the United Kingdom, cited in the part 1 of schedule to the Judicature Act and the law of contract Act (cap.23). One Act of the parliament of India. 4. Subsidiary (delegated) Legislation. 5. English statutes of general application in force in England on 12th August, 1897. 6. The procedure and practice observed by courts of justice in England on the 12th August, 1897. 7. The substance of the common law and doctrine of equity in force in England on the 12th August, 1897. 8. African Customary Law. 9. Case law or judicial precedent. 10. Islamic law. The constitution of Kenya. Is a document establishing the main organs of government, granting them authority and outlining their powers. The constitution may be written or unwritten. It is written when a formal document has been drawn up containing all the fundamental principles of law of the land. On the other hand, it is unwritten when most of the fundamental principles of law of the land are not given in written form in a formal document.

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CONSTITUTION Is the source of law of Kenya in that all laws of the land derive their validity. Any law that conflicts with or is inconsistent with the constitution is void. Definition: Constitution may be defined as consisting of those rules or laws which determines the form of its government and the respective rights and duties of its government and the respective rights and duties of it towards a citizen and of the citizen towards the government (Lord Bryce). The constitution's importance as a source of law and its supremacy is made clear in section 3 of the constitution which states that: "This constitution is the constitution of Republic of Kenya and shall have the force of law throughout Kenya and, subject to section 47 of the constitution, if any other law is inconsistent with this constitution, the constitution shall prevail and the other law shall to the extent of the inconsistency, be void." Sec. 47 provides for how the constitution can be amended.

Legislation By legislation is meant enacted law i.e. Act of Parliament. The legislative power of parliament is exercisable by Bills passed by the National Assembly. A bill is a draft of a proposed Act of Parliament, when National Assembly has passed it, it is presented to the President for his assent. When this assent is given, it becomes law and by definition and Act of Parliament. In Kenya for a bill to become law it passes through - the following stages: which take place in parliament 1. 2. 3. 4. 5. 6.

First Reading Second Reading Committee stage Report stage Third Reading President assent.

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Legislation refers to law which is made by a body specially constituted for that purpose. The legislative power is derived from the constitution and is hence rested in parliament. Legislation may be direct or indirect. Direct legislation is where the law making body is parliament. The law made by parliament is termed as "a statute" or Act of Parliament. Where parliament delegates its legislative power to a body competent, the laws so made are called by laws, statutory instruments, rules or orders. The process of making such laws is termed as indirect legislation or delegated legislation or subsidiary legislation. These by laws must be presented to the minister concerned for his assents before they become operative. Subsidiary or Delegated Legislation Subsidiary or delegated legislation is a part of the written law, and therefore a source of Kenya law. Legislation is one of the functions of parliament, however the constitution allows parliament to delegate this function to competent bodies like Local authority, railways, ministries incharge of Departments to make laws on its behalf. These bodies however make laws, which affect only their ministries, otherwise laws that have uniform application are made by parliament only. Delegated legislation may take the form of statutory instruments, rules and orders, it may also be by-laws.

Reasons for delegated Legislation i) ii) iii)

Parliament does not have enough time to analyze all national policy matters. Urgent matters requiring immediate attention cannot be debated in parliament for at times parliament is not in session. Some technical issues can be handled more effectively by the experts.

Control of Delegated Legislation Delegated Legislation may be controlled by:i) ii)

Parliament Courts.

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Parliament Parliament Controls delegated legislation by nullifying or declaring void any piece of delegated legislation, or part of it. It may also review delegated legislation before it is put into use, upon review, the delegated legislation may be passed, modified or rescinded. Courts Courts Controls delegated legislation by (i) applications of ultra vires principle and (ii) by interpretation of status. Ultra vires principles – where parliament or any other body makes law which is inconsistent with the constitution, the court will declare that law ultra vires constitution. Any law which is inconsisted with the constitution is void, hence can not be applied by our courts. Interpretation of Statutes A statute may have generally provisions of provisions whose meaning is not clear. It is then the duty of the court to interpret such a provision. However in so doing, the court must first seek to a certain the intention of parliament i.e. what remedy was parliament meant to guard against by enacting such provision. Generally the court applies the following rules to interpret the law 1. The literal Rule. 2. The golden Rule. 3. The mischief rule. 4. The Ejusden Genesis rules. The literal rule. This rule stipulates that the words of a statute must be interpreted according to their ordinary, literal and grammatical sense as used in the dictionary. The rule applies where the words used are clear, such that hardly any interpretation is referred at all.

The golden rule If by apply the literal rule, undesirable effects such as inconsistency, absurdity, inconvenience or repugnancy may result, the literal rule will not be applied. Instead the court will apply golden rule. States that

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This rule requires that where the application of literal rule, leads to inconsistency with the existing statute, the grammatical and ordinary meaning of the word should be modified so as to avoid that absurdity of inconsistency. ILLUSTRATION RE SIGSWORTH (1935) Alder V George See Cases The mischief rule The rule applies where the statute in question is aimed at remedying a particular evil, defect or mischief. The court however, must look at the defect the legislation in question was intended to solve and provide the remedy which parliament had resolved to cure the defect. This rule is also called the rule in Re - Heydon's case where it was first formulated. ILLUSTRATION i) GARDINER V SEREMOCKS (1950)

The Ejusden genesis rule This rule states that, where general/ similar words with a clear meaning are followed by a word or phrase whose meaning is not clear, the general / similar words are taken to be as referring only to those things of the same class as specifically mentioned.