DBM 1311 Business Law

SCHOOL OF BUSINESS AND PUBLIC MANAGEMENT
DEPARTMENT OF MANAGEMENT
DBM 111: BUSINESS LAW

INTRODUCTION
This is a first year Diploma courses in business course which gives the students an exposure to
the legal principles that bind transactions that business people engage in. The course first
explores the nature of Law and introduces the student to the Kenyan legal system. Further the
course explores diverse areas of law that relate to the activities that business people engage in a
day to day basis. These include law of torts, law of contract, law of agency, law of employment
and sale of goods law The course is divided into two parts: business law 1 and business law 2.
Business law 1 is offered in the first semester and business law 2 is offered in the second
trimester of study.
Course objectives
By the end of the course unit, the students should be able to:-
a) Appreciate the legal context in which business law applies.
b) Comprehend but simplify account of rules relating to the formation, content and enforcement
of contracts.
c) Illustrate how law applies to business content.
d) Appreciate the significance of business law and its contribution to the development and
success of business.
Course instruction will be through lectures, tutorials, group discussions and individual
assignments.
Attendance and participation at lecture, tutorials and group discussions is required. Through this
the student will understand the legal concepts.
The course will be assessed as per the university examinations regulations where the continous
assessment tests carry 30 marks and the final exam carry 70 marks.
Recommended texts
Joseph Ogola, Business law, Focus Publications, 1999
Dorothy,Enman,O‘Bryne and Gunz, Business and the law, Thomson, Second Edition,2005
Ashiq Hussein, General Principles and Commercial law in Kenya, East Africa Educational
Publishers,2002
Ahmad Saleemi, General Principles of Law Simplified, Saleemi Publications Limited,2007
C.R. Newton, General Principles of law, 1991
C. Hamblin and F. Wright, Introduction to commercial law
Gordon , Commercial law
Reference will also be made to the Constitution of Kenya, Acts of parliament and decided cases.
BUSINESS LAW COURSE OUTLINE
1. The Kenyan legal system

Week One
Definition of law
Classification of law
Sources of Kenyan law
The hierarchy of the Kenyan courts
Reading
Ahmad Saleemi, General Principles of law simplified, Page 1-38
The Constitution of Kenya
The Judicature Act ( Cap. 8 of the laws of Kenya)
2. The concept of legal personality
Week two
Legal persons
Unincorporated associations
Reading
Ashiq Hussein, General Principles and commercial law in Kenya, page 33-54
3. The law of torts

Week Three and Four
Nature of torts
Distinction between tort and other branches of law
General defences and remedies
Specific torts.
Reading
4. The law of contract

Week Five and Six
Definition
Sources of the law of contract
Elements of a valid contract
Terms of a contract
Vitiating factors in a contract
Discharge of a contract
Remedies for breach of a contract
Reading
Law of contract act
5. Sale of goods
Week seven
Definition
Subject matter of the contract,
Terms of the contract
Transfer of ownership
Performance / Duties of the parties to the contract
Breach of contract
Reading
Sale of goods act(cap 31)
6. Law of employment
Week Eight
Nature and definition

Sources of employment law
The contract of employment
Duties/ rights of parties
Termination of the contract of employment
7. The law of agency

Week nine and ten
Sources of law of agency
Formation of agency
Duties between the principal and agent
Authority of agents
Relations between agents and third parties
Termination of agency
Reading
1. Nature and sources of law

General objective
By the end of the lesson the learner should be able to explain the meaning nature and classification of law
Specific objectives
By the end of the lesson the learner should be able to:
a) Define law
b) Explain the classification of law
c) Differentiate between criminal wrongs and civil wrongs
d) List down the sources of law in Kenya
e) Explain the court system in Kenya.
What is law?
There is no exhaustive definition of law. Different definitions which have been offered by
various legal scholars are a reflection of the scholar‘s political, cultural and economic
environment of the societies they live in. some of the definitions which have been offered
include:
a) A law is a general rule of external human action enforced by a sovereign political
authority. (Holland).
b) Law consists of a body of rules which are seen to operate as binding rules in that
community by means of which sufficient compliance with the rules may be secured to
enable the set of rules to be seen binding. (Panton).
c) Law is the body of principles recognized and applied by the state in the administration of
justice. (Salmond).
d) A law is a rule of conduct imposed and enforced by the sovereign. (Austin).
e) A body of rules for the guidance of human conduct. (Philip S. James).
Therefore, the law of state consists of those rules of conduct and standards prescribed by the
people in authority for governing and regulating peaceful relations between members of a
particular community or state.
These rules may originate from Acts of parliament or Customs, and are enforced by the duly
constituted courts of law. Enforcement by the courts takes the form of punishment in criminal
cases, or an order to pay damages or deliver property in civil actions.
Legal wrongs are to be distinguished from rules of morality which are not enforced by the courts
unless the moral legal wrongs are enforced by the courts but moral laws are not unless they are
part of the laws of the state.
Classification of Law
The law is devised into various main classifications:
1) Public law
Private law
2) Criminal law
Civil law.
Public law is the branch of law that regulates the relationship between the state and its citizens.
This branch of law establishes various state organs and their roles/ functions. Examples of
aspects of public law include constitutional law, administrative law and criminal law.
On the other hand, private law is the branch of law that regulates the relationships that occur
between citizens living in a state in their private capacity. This includes law of contract, law of
torts, law of agency, etc.
Criminal Law
Crime is an act, default or conduct prejudicial to the community, the commission o which, by
law renders the person responsible liable to be prosecuted and punished accordingly.
 Prosecution for crimes is always conducted in the name of the state, i.e, the state vs. the
person.
 It is the duty of the prosecution to establish the guilt of the accused beyond any
reasonable doubt.
Examples of crime include: murder, grievous bodily harm, rape, robbery, theft, etc.
Crime must be provided for by the law. The bulk of criminal offences is provided for in the penal
code, but there are other Acts of Parliament which provides for criminal offences, e.g. the Traffic
Act, Public Health Act. Etc.
Punishment for crime ranges from hanging to a fine.
Civil law
Primarily concerned with the isolation of private rights, belonging to an individual in his
capacity as an individual, e.g. refusing to pay back a loan.
 The plaintiff is the one that institutes the matter in the court and the duty of proving (on
burden of proof) lies on him.
 On plaintiff‘s succeeding in a civil action, the defendant will be ordered to compensate
him by paying damages. Therefore, the parties in a civil suit are the plaintiff and the
defendant.
There are three remedies available in a civil action. These are:
1. Damages: a common law remedy designed to compensate the innocent party by ward of
damages.
2. Specific Performance: a court order directing the defaulting party to carry out his specific
obligations, where damages are not adequate remedy.
3. Injunction: this is a court order demanding a person to do a thing or refrain from doing a
particular act.
Civil wrongs include: Breach of contract, breach of tort, trust, law of succession, law of property.
Other branches of law include procedural law and substantive law.
Procedural law: lays down the rules in detail from the guidance of the courts regulating the
manner in which the proceedings are required to be conducted in civil and criminal cases.
Substantive Law: includes actual rules of law as opposed to adjective or procedural law. It
defines civil and criminal wrongs and provides remedies for each type of offences or civil
wrongs.
Sources of Law in Kenya
The Judicature Act (Cap 8 Laws of Kenya) provide for the sources of law in Kenya. These are:
1. The Kenya Constitution
2. All other written laws including the sets of Kenya Parliament and of the United Kingdom
cited in part I of the schedule of this Act, modified in accordance with part II of that
schedule.
3. The substance of the common law, the doctrine of equity and august 1897. They apply so
far only as the circumstances of Kenya and its inhabitants permit and subject to such
qualifications as those circumstances may render necessary. Sec. 3 (c).
4. African Customary Law. Sec 3 (2).
5. Islamic Law
6. Case law or judicial precedent.
The constitution
The constitution establishes the structures of governance within a state by establishing major
state organs. Kenya has had a long history of constitution making culminating in the
promulgation of the current constitution in August 2010.
The constitution is the supreme law of the land and all the other sources of law as
aforementioned should conform to the constitution. Otherwise, if they do not conform to the
constitution, they are null and void. Kenyan constitution is divided into various chaptes which
include:
 Chapter One: Sovereignty of the People and the Constitution
 Chapter Two: The Republic
 Chapter Three: Citizenship
 Chapter Four: Bill of Rights
 Chapter Five: Land and Environment
 Chapter Six: Leadership and Integrity
 Chapter Seven: Representation of the People
 Chapter Eight: The Legislation
 Chapter Nine: The Executive
 Chapter Ten: The Judiciary
 Chapter Eleven: Devolved Government
 Chapter Twelve: Public Finance
 Chapter Thirteen: Public Service
 Chapter Fourteen: National Security
 Chapter Fifteen: Commissions and other Independent Offices
 Chapter Sixteen: Amendment
 Chapter Seventeen: General Provisions
The Acts of Parliament
These are the laws which made by parliament. Parliament is given the power to make laws by the
constitution. Article 94 (1) of the constitution, ―The legislative authority of the republic is
derived from the people, and at the national level, is vested and executed by the parliament‖.
These laws made by parliament are also referred to as legislation or statutes. Parliament makes
these laws by passing draft laws presented to parliament. These draft laws are referred to as bills.
A bill may be presented to parliament by the government in which case it is referred to as a
government bill. It may also be presented to parliament by a member of parliament in his private
capacity in which case it is referred to as a private bill.
Before a bill becomes the law, it undergoes through various stages in parliament. The stages are
provided for in the rules which govern the business of parliament called the standing orders. The
stages are as follows:
1. The first Reading
The bill is read to parliament and no debate is allowed at this stage.
2. Second Reading
At this stage, the bill is read to the house and there is debate on the bill and amendments may be
made at this stage
3. Committee stage
If the bill is approved during the second reading, it proceeds to the committee stage when a
committee is selected to look at and amend the bill.
4. Report stage
The bill‘s report from the committee is read to the whole house with approval from the members.
5. Third reading
Further amendments may be allowed to the bill at this stage.
6. Presidential assent
The bill is finally presented to the president for his assent. Once the president assents to the bill,
it becomes into operation after publication in the Kenya Gazette.
Delegated legislation
Definition
Delegated legislation refers to the exercise of a legislative power, granted ultimately by
Parliament, by a subordinate body such as a local authority, a public corporation, the Supreme
Court, or a university.
Many modern statutes confer authority upon persons and bodies to issue regulations which are
legally binding and which, if disobeyed, may involve those disregarding them in some penalty. A
characteristic of such delegated legislation, however, is that it is only exercised by consent of
Parliament, and the powers may be repealed or withdrawn at any time.
Moreover, the exercise of delegated legislation is very strictly interpreted by the courts, which
have power to declare regulations made as ―ultra vires‖ (beyond the powers granted) if they do
not fall within the statute granting them.
Types
a) Orders in Council
Although the royal prerogative exercised by the Norman kings in promulgating laws in the
Great Council has fallen into disuse, many modern statutes delegate to the Queen-in-Council
the power to issue Orders in Council, particularly in times of national emergency.
b) Ministerial Orders and Departmental Legislation
These consist of the issue of orders and regulations by ministers or government
departments under powers conferred on them by statute. This type of legislation takes a
number of forms of which the following are examples:
 Many statutes merely lay down their purpose in general terms. The details are
filled in by orders issued by the Minister.
 In other cases, the Minister is given powers to make orders with regard to the
subject matter or to vary or even repeal the expressed provisions of the Act.
A typical example is the Road Traffic Act 1972 which grants the appropriate Secretary of State
power to make regulations generally as to the use of motor vehicles on roads, their construction
and equipment, and the conditions under which they should be used. In fact, Sections 40 to 50
define the Secretary of State‘s powers carefully and minutely, specifying the matters on which
regulations can be made, provisions for exemption from the rules, testing regulations and so on.
The principal regulations made under the Act are the Motor Vehicles (Construction and Use)
Regulation 1978 cited as SI 1978/1017. These contain detailed regulations on brake linings,
silencers and construction of petrol tanks, to name but a few.
Most of these orders, however, must be laid before Parliament and must either be approved or
annulled before coming into operation. Other orders which are not laid before Parliament must
be published and notice given of where they may be obtained. A considerable number of these
statutory powers are governed by the Statutory Instruments Act 1946. Statutory instruments
are the most important form of delegated legislation and include all Orders in Council and all
those orders which have to be laid before Parliament.
There is often a statutory duty to consult other bodies (e.g. Trade unions and trade associations)
and civil servants often seek the advice of outside experts regarding the implementation of
Statutory Instruments.
c) Bylaws and Local Authorities
Local authorities have general power to make bylaws, which affect the activities of people living
within their geographical area.
Advantages
 Parliament does not have the time to give to minute details of legislation.
 Technical or scientific matters are often better dealt with by experts employed by the
government departments than Members of Parliament.
 Greater flexibility is provided for unseen contingencies and such legislation is of great
value in an emergency, such as the outbreak of law.
 It affords an opportunity for experiment. If a Minister issues an order and it is found
unsatisfactory, it can be withdrawn at once.
Disadvantages
 The executive tends to get beyond the control of the legislature.
 It intensifies the tendency towards bureaucracy
 There is a tendency towards undue interference with the liberty of the subject.
 Delegated legislation is attacked as weakening one of the principles of the rule of law.
The law-making function is removed from Parliament, which is directly answerable to
the electorate, and placed in the hands of unaccountable officials.
Control Over Delegated Legislation
The volume and complexity of Statutory Instruments- there are about 2,000 Statutory
Instruments made annually- raise complex issues of public awareness and democratic control.
Control is exercised through two bodies- Parliament and the courts.
At the beginning of each session, Parliament appoints a joint Select Committee to scrutinize all
new Instruments and report on any requiring special attention, perhaps through having
retrospective effect or raising wider issues, such as compulsory helmets for motor cyclists.
Most parent Acts stipulate that Statutory Instruments made under them shall be laid before
Parliament. They may further stipulate that Parliament may block the Instrument before it comes
into operation by one of two procedures. Affirmative resolution Procedure normally means
that unless there is a resolution of both Houses approving the instrument within a stipulated time-
frequently 28 days of it being laid before parliament, it will not come into force. The more
common practice is to proceed by way of negative resolution procedure. Unless a motion to
annul the Instrument is passed within 40 days, the Statutory will come into force.
All delegated legislation must be published by HMSO under the Statutory Instruments Act
1946.
Under the doctrine of parliamentary sovereignty, the validity of an Act of parliament cannot be
challenged in courts. This restriction does not apply for delegated legislation. The grounds under
which the courts can review subordinate legislation are ultra vires (i.e., the scope of the
Instrument exceeds the terms laid down in the parent Act) or that procedural requirements laid
down in the parent Act have not been complied with.
In some cases the parent Act requires that interested parties shall be consulted before a Statutory
Instrument may be issued. Bylaws can be challenged on the ground that they are excessively
uncertain, repugnant to the general law or manifestly unreasonable.
4. Common Law of England
Common law is the branch of law that was developed by early English courts based on the
ancient customs of the English people. Notably, the early England justice system was
characterized by formal written system of laws. Therefore, the courts when solving disputes
would rely on the customs of the people.
The law that was developed thereof came to be known as the common law of England.
5. Doctrines of Equity
In ordinary equity means ―fairness‖ but as a source of law in Kenya it is the body of law that was
developed by the court of Chancery in the early England.
This body of law is basically an offshoot of the common law. It developed as a result of the
inherent difficulties that were experienced by litigants who took their claims to common law
courts. The difficulties which were there at common law included:
i. Common law was rigid and due to this rigidity, new claims which required new remedies
went unremedied.
ii. There were a lot of steps/ procedures which a claimant would undergo before he could
get a remedy. This meant that failure to adhere to the extreme procedure some cases
would be thrown out.
iii. There were inadequate remedies at common law. The only remedy that a common law
court would award was the remedy of damages. In law, damages may not be sufficient in
some instances. Take for instance; A and B own adjoining pieces of land in an up market
residential estate. If A decides to start quarrying activities even if the court awards B
damages (monetary compensation) it would not suffice. What B would be in issue of an
order by the court to completely stop A from quarrying. This court order is called an
injunction and it is only available in equity.
Due to the above defects, equity developed and therefore equity came to bring about fairness in
common law. And those doctrines developed are a source of law in Kenya.
6. African Customary Law

This is law based on the customs of the indigenous African people. The legal basis of its
application is found under Section 3 (2) of the Judicature Act.
It is applicable in civil cases and not in criminal cases with respect to certain cases, that is:
 Land held under the customary law
 Marriage, Divorce, Maintenance and Dowry
 Seduction of unmarried woman or girl
 Enticement of, adultery with a married woman
 Matters affecting status of women, children, or widows
 Intestate administration of estate, so far as it is not governed by any written law.
Further, one of the parties must be subject to or affected by it. Thus, it will not be applied if none
of the parties does not belong to the ethnic group where the African customary law is sought to
be drawn.
Thirdly, it will not be applied if it is repugnant to justice and morality. There are certain customs
which will not be enforced by the courts because they are not fair according to our present day
Kenya. Such customs include wife inheritance, among the Luo community, wife sharing among
the Maasai‘s, etc.
Lastly, African customary law is only applicable if it is consistent with the written laws. These
written laws are the constitution, Acts of Parliament, delegated legislation and case laws.
7. Case laws or Judicial Precedent
The doctrine is based on the general principle that once a court has stated the legal position in a
given situation, and then the same decision will be reached in any future case where the material
facts are the same.
This mainly depends to a very large extent on which court gave the previous decision. Usually, it
is from the superior court to the junior courts.
This does not mean that decisions of lower courts will be disregarded by higher courts. These
decisions may not be binding precedents, but they will have persuasive value.
Advantages
 Certainty –The maxim of stare decisis (to stand by the decisions already made) has
contributed certainty and consistency in the development of the rules of law.
 Possibility of Growth- Case law grows out of the practical problems and thus it keeps
pace with the changing needs of the society.
 Rich in detail: Each principle of law or equity is supported by elaborate judgments of
distinguished judges. They are helpful to judges, lawyers and students of law and they
appreciate and apply them to practical problems facing them.
Disadvantages of case law
 Rigidity: the fact that decisions of the superior courts bind the inferior courts, it
destroys original thinking of the judges of an inferior court because he cannot use his
own reasoning.
 Oversubtlelty: the concept of binding precedent has led the judges sometimes to
create artificial distinction in order to avoid fathoming an earlier judgment.
 Bulk of Complexity: Most of it is contained in the calumnious law reports dating
back to Middle Ages. For these reasons, a great volume of case laws has now been
embodied in statutes, e.g. Sale of goods Act, Hire Purchase Act of the Trustee Act.
Islamic Law
Muslim law is a very limited source of law in Kenya. It is applied by Kadhi‘s courts when all
[parties profess to Muslim faith, but only as to questions of law relating to personal status,
marriage, divorce or inheritance.
Hierarchy of the Court System in Kenya

The Supreme Court
Court of Appeal
High Court, Labor Court, Environmental Court
Chief Magistrates Court
Senor Principal Magistrates Courts
Principal Magistrates Courts
Senior Resident Magistrates Courts
Resident Magistrates Courts
District Magistrates Courts
Jurisdiction of Courts in Kenya
Jurisdiction is the powers conferred by law on a court to hear and determine a case. Each of the
courts in the hierarchy (ranking) of courts in Kenya has specific cases which it hears and
determines. These powers are conferred by the law establishing each of the courts.
The Supreme Court
This court is established under Article 163 of the constitution and consists of the Chief Justice,
deputy chief justice and five other judges. This is the highest court in Kenya.
For the purposes of proceedings, it is properly constituted of five judges. It hears and determines
the following cases:
a) Disputes arising from elections to the office of the President.
b) Appeals from the court of appeal and cases involving constitutional interpretation
and appeals certified by the court of appeal to be matters of public importance.
The Supreme Court also gives advisory opinions to the national government, state organs or the
county governments if requested by any of those.
Court of Appeal
This is the second highest court in Kenya and established under Article 164 of the constitution
comprised of not less than twelve judges.
It hears appeals from the high court, Employment and Labour Relations Court and Land and
Environmental Court.
High Court
This is the third highest court in the hierarchy of courts in Kenya. It is established under Article
165 of the constitution. It has the following jurisdiction:
a) Unlimited original jurisdiction in civil and criminal cases
b) Cases concerning denial, infringement,, violation or threat to a fundamental human right
or a freedom
c) Questions regarding the interpretation of the constitution
d) Appeals from the subordinate courts. These are Magistrates courts, Courts martial and
Kadhi‘s courts.
e) Supervising the subordinate courts, bodies and authorities.
Of the same rank as the High court are Land and Environmental court which deals with
environmental cases and Labor and Employment relations courts which deal with labor disputes.
Subordinate Courts
They are referred to as subordinate courts since they are below in rank to the High Court which
has unlimited jurisdiction in civil and criminal cases. They are:
i. Magistrates Courts
ii. Kadhi‘s courts
iii. Courts Martial
Magistrate Courts
They are established under the Magistrate‘s Courts Act and the Constitution.
Unlike the High Court, the jurisdiction of the Magistrates courts is limited in both civil and
criminal cases. The jurisdiction is outlined under the Magistrate Courts Act and is based on the
rank, geographical and pecuniary considerations.
Criminal jurisdiction of the Magistrates Courts
The senior resident magistrate to chief magistrate may adjudicate on major offences such as
robbery with violence and other offences carrying heavy punishments but not murder cases. The
other magistrate courts deal with the other offences.
Civil jurisdiction of Magistrate Courts
Where the value of subject is between:
 Kshs 2 Million – Kshs. 3 Million – Chief Magistrate
 Kshs 1 Million –Kshs 2 Million – Senior Principal Magistrate
 Kshs 800,000 – Kshs 1 Million - Principal Magistrate
 Kshs. 500,000- Kshs 800,000 – Senior Resident Magistrate
 Below Kshs 500,000 – other Magistrate‘s Courts.
Note: District Magistrates courts hear cases from the districts in which they are based.
Kadhi’s Courts
Established under Article 170 of the Constitution and its jurisdiction in cases regarding personal
status, marriage, divorce and inheritance cases among parties both of whom profess Islamic faith.
The jurisdiction is discretionary on the parties in disputes. Therefore if parties would like their
cases heard by the mainstream courts, there is no bar to this.
Courts Martial
Established under Article 169 of the constitution and operate under the Armed Forces Act. They
hear cases of offences committed under the Armed Forces Act, offences which are meant to
instill discipline among members of the armed forces, army, navy and the air force.
The trial magistrate who presides over the proceedings in a courts martial is known as a judge-
advocate usually appointed by the chief justice.
Note
Apart from the courts, there are bodies established under various Acts of Parliament which also
adjudicate a variety of disputes. Examples include:
a) Rent Restriction Tribunal under the Rent restrictions Act
b) Business Premises Tribunal under the Landlord and Tenant (shops, hotel and
establishments) Act.
c) Cooperatives Tribunal under the Cooperatives Act.
REINFORCING QUESTIONS
1. List and explain the various sources of Kenya Law.
2. Explain the importance of the following:
(a) Law in the society
b) Courts
3 Explain the difference between Common Law and Equity. In what ways do Common Law
rights differ from equitable rights.
TOPIC 2: THE CONCEPT OF LEGAL PERSONALITY

General objective
At the end of the lesson the learner should be able to explain the various types of businesses with a legal
personality
Specific objectives
By the end of the lesson the learner should be able to: -
a) Differentiate between natural persons and legal persons
b) Explain the various ways in which corporations are created.

c) Explain the various the various ways Kenyan citizenship can be acquired
d) Explain the various types of unincorporated` associations
Introduction
The law is meant to apply to certain subjects when it is being made. These subjects have duties
and rights in law. The subjects of the law are referred to as legal persons. There are two kinds of
legal persons:
1) Natural Persons
2) Artificial Persons
The main concern of this topic is artificial persons as natural persons are human beings whom
from the very outset you know have rights and obligations under the law. Artificial persons are
the creations of the law and they have rights and obligations just like the natural persons.
Artificial persons can be divided into two broad categories:
1) Corporations
2) Unincorporated Associations
Corporations
They are also referred to as body corporate and are divided into:
a) Corporation sole
b) Corporation Aggregate
c) Statutory Corporations.
Corporation sole
This is an office created by an Act of Parliament and occupied by one person at a time. If a
person ceases to hold the office another person is appointed to the office. E.g. the office of the
Public Trustee.
Corporation Aggregate
This is the legal entity which is formed by at least two people. This includes companies formed
under the Companies Act and Cooperative societies formed under the Cooperative Societies Act.
Essentially, once a company is registered under the companies Act or a Cooperative is registered
under the Cooperative Societies Act, it acquires a different legal existence from that of its
members. This is what is known as the concept of legal personality.
The concept of legal personality has the following implications:
 In the case the company is unable to pay its creditors, then the creditors cannot find the
satisfaction of their debts in the personal property of the members. This is what is
referred to as limited liability of companies. This was upheld in the famous English case
of Salomon vs. Salomon & Co. Ltd.
 Even though members of the company die, the company continues in existence. The
dependants of the deceased members will usually take over. This concept is known as
perpetual succession of a company.
 The company can hold and own property in its own name.
 The company can institute proceedings in its own name and consequently can be sued.
Statutory Corporation
These are corporations formed by Acts of Parliament e.g. National Water and Pipeline
Conservation Corporation.
Unincorporated Associations
This is where a group of people come together for a common purpose but without going through
the vigorous process of registration.
TOPIC 3 LAW OF TORTS
General objective
By the end of the lesson the learner should be able to explain the application of the law of tort in business
Specific objectives
By the end of the lesson the learner should be able to:
a) Explain the functions of the law of torts
b) Explain the general defences applicable in the law of torts
c) Explain the capacity to sue or be sued for various individuals and entities
d) List down four specific torts and explain the available defences in each one of them.
NATURE AND DEFINITION OF TORTS

The word tort has been derived from the Latin tortus which means crooked or twisted. In French,
tort means a wrong. In law, tort denotes certain civil wrongs. It means, a tort is a wrong. Sir F.
Pollock has defined tort as ―An act which causes harm to a determinate person, whether
intentionally or not, not being a breach of a duty arising out of a personal relation or contract,
and which is either contrary to law, or an omission of a specific legal duty, or a violation of an
absolute right‖.
Every tort results from the breach of a certain duty which is primarily fixed by law, unlike other
civil wrongs, such as breach of contract, where the duty in question is fixed by the parties
themselves. Thus, the duty not to defame, injure or damage the property of any person is one
fixed by the law and its breach may constitute a tort, whereas the duty to supply goods under a
contract of sale is duty created by the parties themselves in their contract. In tort, the duty is
imposed on persons generally, i.e. on ever individual, but in other cases the duty is imposed only
on the parties concerned, e.g. the duties created by a contract are imposed only on the parties to
the contract and on no one else. Similarly, the duty in tort is owed to every other person, unlike
in contract cases where one contracting party owes his contractual obligation to the other
contracting party and to no one else.
A tort, as such, differs from other civil wrongs in a number of respects. It is common law wrong
which is usually remedied by an award of ―Un liquidated Damages‖. Unliquidated damages are
those whose quantum or assessment is left for the determination to a court at its discretion. These
are distinct from liquidated damages which are fixed by the plaintiff. Certain other remedies are
also available which will be considered when the various torts are separately dealt with.
A person who commits a tort is called a tortfeasor. Where two or more persons commit a tort,
they are known as joint tortfeasors. They may be sued jointly, or any one of them may be sued
for the whole of the damage. In case of the joint tortfeasors, there is a right of contribution, under
which the court may apportion the damages between them in such a way as is just, having regard
to their respective degrees of blame (Law Reform Act (Cap. 26, section 3).
AIMS OF THE LAW OF TORTS

The primary function of the law of torts is to compensate persons injured by the civil wrongs of
others, by compelling the tortfeasor to pay for the damage occasioned by his tort. Besides this,
there are certain other functions and these include the following:
To determine rights between parties to a dispute. A party to a dispute may bring an action for a
declaration of his rights; and once the court makes a declaration, the rights of the parties are
determined.
To prevent a Continuance or Repetition of Harm. Where the injury complained of is of a
continuous nature or likely to be repeated by the tortfeasor, the injured party may be granted an
injunction to prevent its continuance or repetition, e.g. in cases of trespass to land.
To Protect Certain Rights Recognized by Law. There are certain rights which every individual is
entitled to and which are recognized by law. These rights are protected by the law of torts e.g. a
person‘s reputation or right to good name is protected by the tort for negligence which imposes a
duty of care on every other person.
To Restore Property to its Rightful Owner. Where property is wrongfully taken away from its
rightful owner or otherwise dealt with contrary to his rights, he may seek a restitution of the
property or its value since the wrongful act amounts to the tort of trespass to goods (or land).
MALICE
Malice means ill-will or desire to cause damage to someone. In legal sense, malice means a
wrongful act which is done purposely without having a lawful excuse. In tort, the intention or
motive for an action is generally irrelevant. The general rule is that a bad intention does not make
a lawful action as unlawful and similarly an innocent or good intention is not a defence to a tort.
Bradford Corporation v. Pickles (1895).
P, with a view to inducing Bradford Corporation to buy his land at a high price, sank a shaft on
his land which interfered with the water flowing in undefined channels into the corporation
reservoir. The corporation applied for an injunction to restrain P from collecting the underground
water. Held: that an injunction would not lie. P was entitled as owner to draw from his land the
underground water. His ‗malice‘, if any, in trying to force the purchase of land, was irrelevant.
No use of property which would be legal if done with a proper motive can be illegal if done with
an improper motive.
Wilkinson v. Downton (1897).
A, as a practical joke, told Mrs. B that her husband had met with an accident. Mrs. B suffered a
nervous shock and was ill as a result. Mrs. B brought an action against A for false and malicious
representation. The fact that A passed the information as a joke was irrelevant, and Mrs. B was
entitled to damages.
Malice in itself is not a tort, but it can be an important element in certain torts. Main examples of
such torts are: Malicious prosecution, malicious falsehood, defamation, conspiracy and in certain
cases, nuisance.
NATURE OF TORTIOUS LIABILITY
We have already stated that a tort is a civil wrong which is usually remedied by an award of
unliquidated damages. Prof. P.H. Winfield asserts that “tortuous liability arises from the breach
of a duty primarily fixed by law; such duty is towards persons generally, and its breach is
redressible by an action for unliquidated damages”.
Every person is under a duty to compensate for his wrongful acts which have resulted in injury to
another person. It is this duty to compensate that determines his liability in tort. Generally, the
plaintiff must prove that he has suffered harm and that there has in consequence been a violation
of his legal right. Some civil wrongs are actionable even if no damage is suffered e.g. trespass to
land. Whether the plaintiff has any remedy in some cases of tort depends on the following two
principles of general application:-
Damnum Sine Injuria:
Literally translated, this phrase means ―Harm without legal injury.‖ It refers to a circumstance
where a person has suffered actual harm without any violation of his legal right. A person
aggrieved in this way has no legal remedy:
Mogul Steamship Co. v. McGregor, Gow & Co. (1982).
Certain ship-owners reduced their freight charges for the sole purpose of driving their rival out of
business. The plaintiff, who had thus been driven out of business, brought an action against the
ship-owners. Held: A trader ruined by the legitimate competition of his rivals could have no
redress in tort.
Injuria Sine Damnum
This refers to a situation where a person suffers a violation of his right without any actual loss or
damage sustained by Him. This is especially so in the case of torts which are actionable ―per‘ se‘
(i.e. without proof of any damage) e.g. trespass to land, lible etc.
The Court can award the damages to the plaintiff in such cases.
Ashby v. White, (1703)
In this case the defendant, a returning officer, wrongfully refused to register a properly tendered
vote of the plaintiff who was a legally qualified voter. In spite of this, the candidate for whom the
vote was tendered was elected, and no loss was suffered by the rejection of the vote. It was held
that the defendant was liable because he deprived the plaintiff of his legal right of registering his
vote.
The tortious liability can be also determined on the basis of the following principle:
The Fault principle
Most torts are based on the fault principle. Under this principle, it is necessary to establish some
fault on the part of the wrongdoer because he can be made liable in tort. A person is said to be at
fault where he fails to live up to some ideal standard of conduct set by law. Three elements are
relevant in the determination of fault, and any one of them may be relied upon:-
(i) Intention:
Where a person does a wrongful act desiring that its consequences should follow, he is said to
have intended it; and to that extent there is some amount of fault on his part.
(ii) Recklessness:
An act is said to be done recklessness where it is done without caring whatever its consequences
might be. Recklessness, as such, constitutes fault on the part of the wrongdoer.
(iii) Negligence
A person is also a fault where he does a wrongful act negligently i.e. where the circumstances are
such that he ought to have foreseen the consequences of his act and avoided it altogether. (Here,
we are concerned with negligence as an element of fault).
Distinction between Tort, Crime and Breach of Contract
We may distinguish between a tort, a crime and a breach of contract as under:
(i) Tort and Crime
A crime is a breach of public rights whereas a tort is a civil wrong. The main object of criminal
proceeding is the punishment to the criminal persons but the object of proceedings in tort is not
punishment. Its main aim is the compensation to the plaintiff for the loss or injury caused by the
defendant i.e. damages. Some cases may be actionable under criminal law and law of torts e.g. if
‗A‘ assaults ‗B‘, there is both a crime and a tort.
(ii) Tort and Breach of Contract:
In contract, the duties are fixed by the parties to a contract. But in tort, the duties are fixed by law
(common law or statute). In some cases, a breach of contract and tort may take place
simultaneously. We assume ‗X‘ employs a private surgeon to operate his wife. If ‗Y‘ fails to
perform his duty properly
then ‗X‘ has a cause of action against ‗Y‘ for (i) breach of the contractual duty of care, and (ii)
the tort of negligence.
GENERAL DEFENCES
A person sued in tort has at his disposal certain defences, some of which are restricted to
particular torts (e.g. contributory negligence is a defence only to the tort of negligence), while
other are of a general defences.
The following general defences are available to a defendant in every action for tort where they
are appropriate:-
(i) Volenti non fit Injuria
(ii) Inevitable Accident.
(iii) Act of God
(iv) Necessity
(v) Self-defence
(vi) Mistake
(vii) Statutory Authority
(viii) Exemption Clauses (or Disclaimers)
These are explained as under:-
Volenti Non Fit Injuria
Volenti non fit injuria is also known as the voluntary assumption of risk. Where a defendant
pleads this defence, he is in effect saying that the plaintiff consented to the act which is now
being complained of. The plaintiff‘s consent may be either express or implied from his conduct.
Before ‗volenti‘ can be upheld as a defence, it must be proved that the risk involved, for a person
cannot consent to what is not within his knowledge. By his consent the plaintiff voluntarily
assumes the risk of whatever consequences might follow from the act he has consented to.,
Consequently, where ‗volenti‘ is successfully pleaded its effect is to deny the plaintiff any
remedy at all against the defendant:
Volenti non fit injuria means no injury can be done to a willing person. For example, a football
player cannot complain for being injured while playing the game. Similarly, a surgeon can claim
this defence if the person being operated dies during the process of operation. It also applies in
other sports like boxing, cricket etc.
Khimji v. Tanga Mombasa Transport Co. Ltd (1962)
The plaintiffs were the person representatives of a deceased who met his death while traveling as
a passenger in the defendant‘s bus. The bus reached a place where the
road was flooded and it was risky to cross. The driver was reluctant to continue the journey but
some of the passengers, including the deceased, insisted that the journey should be continued.
The driver eventually yielded and continued with some of the passengers, including the
deceased. The bus got drowned together with all those aboard it. The deceased‘s dead body was
found the following day. Held: The plaintiff‘s action against the defendants could not be
maintained because the deceased knew the risk involved and assumed it voluntarily and so the
defence of volenti non fit injuria rightly applied.
Apart from instances like those of the above case, the defence of ‗volenti‘ has been pleaded in a
number of situations, including the followings: 1) A passenger injured by the act of a driver
whom he knew to be under the influence of drink at the material time; 2) A spectator at a game,
match or competition injured by the act of the players or participants; and (3) A patient injured
by the act of his surgeon, where the patient has consented to the operation. The viability of the
defence depends on the circumstances of each case; otherwise the consenting party does not, by
his consent, necessarily give an open cheque to the other party to act negligently, high-handedly
or in any manner he pleases. Moreover, volenti is not available as a defence to certain actions.
This is particularly so in rescue cases. Where the defendant creates a situation in which some
person is put in imminent danger, and the plaintiff, at the risk of his own life and safety, rescues
the endangered person incurring injury or damage in the rescue process, the defendant cannot
plead that the plaintiff has voluntarily assumed the risk to his life: he is liable for the injury or
damage sustained by the plaintiff:
Haynes v. Harwood, (1935)
The defendant‘s servant left a van and horses unattended in a crowded street. A boy threw a
stone at the horses and they bolted. This exposed a woman and some children nearby to some
grave danger. The plaintiff, a police constable, managed to stop both horses; but he did so at
great personal risk and in fact sustained severe injuries. In an action brought against him, the
defendant pleaded volenti. Held: (1) The doctrine of voluntary assumption of risk did not apply
because the plaintiff, in rescuing the persons in imminent danger, had acted under an emergency
caused by the defendant‘s wrongful act. (2) It was immaterial that the persons to be saved were
strangers, and the defendants were liable.
Necessity:
A person may sometimes find himself in a position whereby he is forced to interfere with rights
of another person so as to prevent harm to himself or his property. For instance, if he is about to
be shot he may feel constrained to use the person next to him as a shield against the gunman; or
being hungry he my steal food in order to survive; or being about to fall into a pit he may grab
another person for support, in the process taking the latter with him into the pit. In all these cases
he may seek to justify his action as a matter of necessity. It is based on the maxim “salus populi
supreme lex” i.e. the welfare of the people is the supreme law.
All the cases decided on the defence of necessity point to the fact that this defence is difficult to
maintain and is very rarely allowed by court. The general rule is that no person should unduly
interfere with the person or property of another. It is only in exceptional circumstances of an
urgent situation of imminent danger that this defence may be upheld:
Cope v. Sharpe, (1912)
The defendant committed certain acts of trespass on the plaintiff‘s land in order to prevent fire
from spreading to his master‘s land. The fire never in fact caused the damage and would not have
done so even if the defendant had not taken the precautions he took. But the danger of the fire
spreading to the master‘s land was real and imminent. Held: The defendant was not liable as the
risk to his master‘s property was real and imminent and a reasonable person in his position
would have done what the defendant did.
In view of the difficulty posed by the above defence, it is not advisable for a defendant to rely
solely on it, especially where there are other defences. It is safer to plead it as an alternative to
another defence.
Self Defence
It is sometimes said that a person who is attacked does not owe his attacker a duty to escape.
Everyone whose person is threatened is entitled to defend himself; and he may do so by using
force. Force, however, may only be used where necessary, otherwise the person claiming to
defend himself might find himself liable to his alleged attacker. Thus, where a person is
assaulted i.e. threatened with immediate harm, but no harm is actually inflicted to him, he should
not himself use force in an effort to defend himself. Where force has actually been applied (i.e.
where there has been a battery the person attacked has a right to defend himself in the same way,
i.e. by applying force. But the force used in self-defence must be reasonable and proportionate to
that used in attacking him; otherwise if it is unreasonable or excessive in the circumstances he
will himself be liable to his attacker. Thus a person attacked with a fist, pocket knife or small
stick may respectively defend himself with a fist, pocket knife or small stick, or he may even use
lesser force. But if in these circumstances he responds with a panga or spear or gun, clearly the
force used by him in self-defence will be unreasonable and disproportionate and he will be liable
to his attacker.
Cresswell v. Sirl, (1948)
A dog by plaintiff, C, attacked during the night some in-lamb ewes owned by S. The dog had just
stopped worrying the sheep and started towards S, who shot it when it was 40 yards away. C
sued for trespass to goods (dog). Held: S was justified in shooting the dog if (i) it was actually
attacking the sheep; or (ii) if left the dog would renew the attack on them, and shooting was the
only practicable and reasonable means of preventing revival. The onus on justifying the trespass
lay on the defendant. (protecting livestock against dogs is now on a statutory basis; s. 9 of the
Animal Act, 1971.)
An occupier of property may also defend his property where his interest therein is wrongfully
interfered with. Once again, reasonable force must be used in the defence of property. A
trespasser, for instance, may be lawfully ejected using reasonable force. The use of force which
is not called for in the circumstances entails legal liability on the part of the person purporting to
defend his property.
Mistake
The general rule is that a mistake is no defence in tort, whether it is a mistake of law or of fact.
Mistake of fact may be relevant as a defence to any tort in some exceptional cases. This could
arise in cases of malicious prosecution, false imprisonment and deceit. For example, where a
police officer arrests a person about to commit a crime but the person arrested is innocent then
the police officer is not liable. In this case, the mistake is reasonable ground for the defence in
the tort. Mistake cannot be a defence in actions for conversion or defamation.
Statutory Authority
Where a statute authorizes a particular act, a person who does it is not liable in tort. The
authorization of an act is also an authorization of its natural consequences. But the person acting
must do so in good faith and within the scope of the powers conferred by the statute; or else he
will not be protected. Where the person acting exceeds the powers conferred by the statute, the
compensation payable by him to the injured party cannot be more than what is provided by the
statute itself. The statute may stipulate a definite sum, or it may give powers to certain officials
to assess the loss suffered by the injured party. Thus, where a person has acted in pursuance of
the provisions of a statute, he may plead statutory authority in his defence; and where the statute
does not protect him from liability (e.g. where he has exceeded his powers) and the injured party
claims by way of compensation a sum in excess of that stipulated by the statute, he may plead
the statute in mitigation. This is especially so in what are known as statutory torts.
Vaughan v. Taff Vale Railway Co. (1960)
A railway company was authorized by statute to run a railway which transversed the plaintiff‘s
land. Sparks from the engine set fire to the plaintiff‘s woods. Held: that the railway company was
not liable. It had taken all known care to prevent emission of sparks. The running of locomotives
was statutorily authorized.
CAPACITY
The general rule is that any person may sue or be sued in tort. All persons are subject to the same
laws. However, some special rules apply in certain circumstances which either restrict, forbid or
qualify the right to sue or be sued. It means certain persons cannot sue, while some other persons
cannot be sued.
Capacity means the capacity of parties or persons to sue or to be sued in law of torts. The
capacity of various persons in the law of torts is explained as under:
The Government
The Government Proceedings Act (Cap 40) makes the Government subject to liabilities in tort as
if it were a private person of full age and capacity. Section 4 (1) of this Act provides that the
Government is liable:
(a) in respect of torts committed by its servants or agents;
(b) 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; and
(c) in respect of any breach of the duties attaching at common law to the ownership, occupation,
possession or control of property.
The Government is also liable for statuary torts i.e. torts arising from breach of a duty imposed
by statute. However, the Government is not liable for any thing done or omitted to be done by
any person while discharging any responsibilities of a judicial process (Sec: 4(5). The
Government is not also liable for torts committed by public officers who are appointed and paid
by local authorities, or members of public corporations like Kenya Railways, Maize and Produce
Board of Kenya e.t.c.
Infants and Minors:
As a general rule minority is no defence in tort. Infants can sue and be sued in the same way as
any other person. However, the age of an infant may be relevant in some torts where intentions,
malice, or negligence of the wrongdoer are the main cause of the tort. In the case of negligence,
the infant may not have reached the stage of mental
development where it could be said that he should be found legally responsible for his negligent
acts. A child may be also guilty of negligence if old enough to take precautions for his own
safety. In Attorney-General v. Vinod, (1971) E.A., a child aged 8½ years was held partly to
blame for an accident.
An infant may not be liable in tort in a case which is a breach of contract. Similarly, an infant
will be liable in tort if this tort is independent of a contract.
Jennings v. Randall, (1799)
An infant hired a mare for riding (not necessary). He injured the animal by overriding her and
was sued in tort for damage. Held: The infant was not liable in tort for negligence since this act
was mainly a breach of contract.
Burnard v. Haggis, (1863)
A minor hired a horse for riding and was told by the owner not to jump over it. But he jumped
the horse and injured it. Held: The minor was liable for his tort which was of independent of the
contract.
Generally, a parent or guardian is not liable for the torts of his children unless he authorizes the
tort. But a parent or guardian is liable for torts committed by children in negligence.
A parent permitted his son aged 15 to remain in possession of a shotgun, with which the son had
already caused harm and in respect of which complaints had been made. Held: The father was
liable for injury to another body‘s eye.
Husband and Wife:
The position of husbands and wives in tort is covered by two English statutes. These are: the
Married Women‘s Property Act 1882 and the Law Reform (Married Women and Tortfeasors)
Act, 1935. The former Act is a statute of general application is Kenya. The latter statute applies
Kenya to the extent of paragraphs (b) and (c) of section 1.
A married woman is liable in tort and may sue or be sued in tort in the same way as though she
were a female sole (i.e. a single or unmarried woman). A wife can sue her husband in tort for the
protection and security of her property. In Kenya, a husband is still liable for his wife‘s torts.
Both husband and wife have the capacity to sue and be sued in tort. At common law a husband
could not sue his wife in tort, and a wife could not sue her husband in tort except for the
protection of her own property.
The President
The Constitution of Kenya (Section 14) provides that the President of Kenya is not “liable to any
proceedings whatsoever in any court.” It means that no civil or criminal proceedings can be
instituted against the President while he is in office.
Heads of State and Diplomats:
The Heads of foreign states, diplomats of foreign missions and certain other persons connected
to them are immune from the jurisdiction of the local courts. Their immunity is provided by the
Vienna Convention on Diplomatic Relations, signed in 1961, the relevant articles of which are
given the force of law in Kenya by ―The Privileges and Immunities Act (Cap. 179)‖.
The accredited diplomats and their staff families enjoy immunity from the criminal and (subject
to specified exceptions) from the civil and administrative jurisdiction of the local courts. The
immunity does not extend to Kenyans who are employed by diplomatic missions.
Representatives of the United Nations Organization and its specialized agencies can also claim
diplomatic immunity. Although the diplomats and their staff cannot be sued under the law of tort
but it is always open to the Ministry of Foreign Affairs to declare a diplomat ‗persona non grata‘,
thereby requiring his removal from Kenya.
Corporations
The corporations can sue and be sued in their own names. They are liable to actions in tort. A
corporation is also liable for torts committed by its servants and agents. But if a servant of a
corporation commits a tort which is ‗ultra vires‘ (beyond the powers) then the corporation is not
liable for some torts of personal nature e.g. personal defamation, battery etc.
Trade Unions:
The trade unions have capacity to sue in tort but actions against them in tort are limited. Section
23 of the Trade Unions Act (Cap. 223) provides that no action shall be brought against a trade
union for torts committed by its members of officials in respect of any act done in contemplation
or in furtherance of a trade dispute. For example, if a trade union calls a strike, it cannot be sued
by an employer for the tort of inducing a breach of contract.
A trade union can be sued for breach of contract. The members and officials of a trade union can
be sued for actions in tort committed in their personal capacity.
Persons of Unsound Mind:

These are generally liable in tort unless an intent is a necessary element and their condition is
such that they could not have formed such intent.
Morriss v. Marsden, (1952)
Defendant took a room at a Brighton hotel. While there he attacked the manager of the hotel
(plaintiff). It was established that defendant was suffering from disease of the mind at the time of
the attack; that he knew the nature and quality of his act, but he did not know that what he was
doing was wrong. Held: That as defendant knew the nature and quality of his act he was liable in
tort for the assault and battery. It was immaterial that he did not know that what he was doing
was wrong.
Aliens or Non-Citizens
An alien is under no disability and can sue and be sued. However, an enemy alien cannot sue, but
if sued can defend himself.
Judicial Officers
Judicial officers are protected from civil liability for any act done or ordered by them in the
discharge of their judicial functions. Thus, where a judge or magistrate utters words which tend
to reflect on a person‘s reputation, or orders a party‘s property to be attached in satisfaction of a
judgement-debt, no action can respectively be brought against him for trespass. Besides judicial
officers, officers of the court are also protected against civil liability for acts done in pursuance
of a judicial order or warrant. This means that a court broker cannot be sued for attaching
property under a warrant duly issued by court, as long as he acts within the powers conferred on
him by the warrant. The protection to judicial officers and officers of court is afforded by the
Judicature Act (Cap. 8) Section 6.
SPECIFIC TORTS
VICARIOUS LIABILITY:
Every person is obviously liable for his own wrongful acts. Liability in this case is personal. In
certain circumstances, however, a person may assume responsibility for torts or wrongful acts
committed by another person, e.g. an employer may be held responsible for the torts of his
employee. Liability in this latter case is categorized as vicarious liability. So it is the liability of
one person on the behalf of the other person.
There must be Master/Servant relationship between the parties concerned.
The Servant must have been acting in the course of his employment at the material time.
Once it is established that the wrongdoer was at the material time acting as a servant of some
other person, and that he was then acting in the course of his employment, his master will be
liable for any tort that may have been committed during that time. This explains why employers
often find themselves being sued for torts committed by their employees.
Century Insurance Co. v. N.I. Road Transport Board, (1942)
The driver of a petrol tanker, whilst transferring petrol from the lorry to an underground tank,
struck a match to light a cigarette. He threw the lighted match on the floor, and this resulted in a
fire and an explosion that caused considerable damage. Held: The driver‘s employers were liable
for his negligence in the discharge of his duties.
Cases like the one given above are straightforward and present no problem in determining
whether the wrongdoer is or is not a servant. Sometimes, however, it is difficult to tell whether a
particular person is a servant.
Who is a Servant?
Ordinarily, the nature of a servant‘s work should present no problem. Unfortunately, problems
arise from the need to distinguish a servant from an independent contractor.
A servant is a person employed under a contract of service and acts on the orders of his master.
The master therefore controls the manner in which the servants work is done. On the other hand,
an independent contractor is employed under a contract for services and himself determines the
manner in which the work in question is done. An independent contractor therefore does not act
on the orders of his employer and is his own master as regards the execution of the work he is
employed to do. Thus, if A owns a vehicle and employs B to drive it for him, B is A‘s servant;
but where A is not the owner of the vehicle and engages B (the owner or driver) on special hire
to drive him to some place(s), B is not a servant but an independent contractor. Again where A
engages B to build a house for him, and A himself directs the manner in which the work is to be
done, supervising the work to ensure that his directions are complied with, B is a servant; but
where A engages B, a professional builder and relies on his expertise and refrains from
interfering with the construction work, B is in this case an independent contractor.
The distinction between a servant and an independent contractor is important because an
employer is liable for the wrongful acts of his employee only if the latter is his servant; he is not
liable where the employee is an independent contractor. An independent contractor is personally
liable for his own wrongful acts.
Course of Employment:
An act is said to have been done by a servant in the course of employment where it is proved to
have been authorized or sanctioned by his master. Thus, where the master
authorizes his servant to do a wrongful act. Where the servant is authorized to do a particular act
in a proper manner, but does it in a wrongful and unauthorized manner, the master is still
responsible for the consequences of the act. What is important is the fact that act was authorized
by the master. Once master‘s authority is proved it is considered as the responsibility of the
master and he is declared as liable for this tort.
Indeed, the fact that the master has expressly prohibited a particular act is of no consequence at
all, as long as the servant has the master‘s general authority to act in the matter in question.
Limpus v. London General Omnibus Co., (1862)
An accident was caused by the one of the defendant‘s drivers who drew across the road so as to
obstruct a rival omnibus. The defendant pleaded in defence that he had issued each and every
one of its drivers a card which stated that they ―must not on any account race with or obstruct
another omnibus” Held: The defendant was liable and it was no defence that it had issued
specific instructions to its drivers not to race with or obstruct other vehicles.
Rose v. Plenty, (1976)
Plenty was employed as a milk rounds man, and his work required the use of a vehicle called a
―milk float‖. His employment contract contained the following prohibition: ―Children and young
persons must not in any circumstances be employed by you in the performance of your duties.‖
Plenty nevertheless employed the plaintiff, a 13-year old boy to help him distribute the milk. On
one occasion the plaintiff was sitting with his foot dangling down so that he might be able to
jump off the vehicle quickly. Plenty was driving negligently and a wheel caught the plaintiff‘s
leg and broke it. Held: Plenty‘s employer was liable because plenty, by employing the plaintiff,
did so for his employer‘s business and the disregard of the prohibition did not take the employee
outside the course of his employment.
(Note: In the above case plenty himself was also held liable to the plaintiff).
It is important to note that a master is liable for the tort of his servant only if the tort was
committed while the servant was acting in the course of his employment. It sometimes happens,
however, that a servant may do an act which is completely outside the scope of his employment,
e.g. a conductor may decide on his own to drive his master‘s vehicle. In this case the servant is
said to be on a frolic of his own and the master is not liable for his wrongful acts:
Beard v. London General Omnibus, (1900)
The conductor of an omnibus belonging to the defendant company decided, at the end of a
journey, to turn it round for the return trip. This was in the absence of the driver. As a result of
the conductor‘s negligence, a collision occurred. Held: The defendant company was not liable as
the conductor‘s act was neither authorized nor a manner of performing a conductor‘s duties.
Storey v. Ashton, (1869)
A driver was sent by his employer to deliver wine and collect empty bottles. On the return trip,
he obliged a friend by driving off in another direction. Held: The driver‘s employer was not
liable for damage caused by the employee while driving in the other direction, because he had
started on an entirely new journey, given that every step he drove took him away from his duty.
But it must be observed that not every detour by a driver necessarily takes him outside the course
of his employment; a particular detour may be reasonably incidental to it, depending on the
circumstances.
Liability for Independent Contractors:

An employer is not liable for the torts of an independent contractor or of any servant employed
by the contractor. This rule has been based on the fact that the employer does not have strict right
of control over the method used by the contractor. But there are some exceptions to this rule. It
means an employer will be still liable for the actions of an independent contractor in the
following cases:
(a) Where the employer retains his control on the contractor.
(b) Where contract made is itself a tort e.g. a nuisance.
(c) Where the Rule in Rylands v. Fletcher, (1866) applies
STRICT LIABILITY
Strict liability is an exception to the fault principle. It is liability without fault. Where a tort is
one of strict liability there is no need to prove fault on the defendant‘s part. Once the plaintiff is
proved to have suffered damage from the defendant‘s wrongful act, the defendant is liable
notwithstanding with there may have been no fault on his part. A specific instance of strict
liability is afforded by the Rule in Rlylands v. Fletcher discussed below.
Although, the strict liability is liability without fault but it does not mean that wrongdoer or
tortfeasor has no defence at all. Certain defences may be available in some specific
circumstances in case of strict liability.
We may also distinguish between absolute liability and strict liability. Where there is absolute
liability, a particular wrong is actionable without proof of fault on the part of the tortfeasor and in
addition there is no defence whatsoever to the action. Where there is strict liability, a particular
wrong is actionable without proof of fault but some defences may be also available.
Strict liability may be considered in the following cases:-
i. The Rule in Rylands v. Fletcher, (1866)
ii. Liability for Fire, and
iii. Liability for Animals.
The Rule in Rylands v. Fletcher, (1866)

The following statement is commonly called the Rule in Rylands v. Fletcher:
―The person who, for his own purposes, brings on his land and collects and keeps there anything
likely to do mischief if it escapes, must keep it in at 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 is a rule of strict liability and negligence in this case is irrelevant. This rule was formulated
on the basis of the following case:-
Rylands v. Fletcher, (1866)
The defendants constructed a reservoir on their land for the purpose of supplying water to their
mill. The site chosen had a disused and filled up shaft of an old coal-mine, whose passages
communicated with the adjoining mine of the plaintiff. But this fact was not known to the
defendants, who therefore took no precaution against it. When the reservoir was filled, the water
escaped down the shaft into the plaintiff‘s mine, flooding it and causing great damage. Held: The
defendants were liable and it was immaterial that there was no fault on their part.
The court considered that the situation that arose in the above case was the first of its kind. There
was no established rule on the basis of which the defendants could be made liable. Yet it was
clear that the damage suffered by the plaintiff was caused by the act of the defendants and that
the circumstances called for compensation to be paid by the defendants to the plaintiff. The court
therefore formulated the above Rule (the Rule in Rylands v. Fletcher) and on the basis of it made
the defendants liable even though no fault could be proved on their part. In Rylands v. Fletcher
itself the defendants for their own purposes brought on to their land water, collected and kept it
there in a reservoir specially constructed for that purpose. The water was something likely to do
mischief if it escaped. It did escape down the shaft and actually did mischief since it escaped. It
did plaintiff‘s mine. The damage to the plaintiff‘s mine was the natural consequence of the
escape of the water. Accordingly the Rule formulated by the court applied and the defendants
were liable to the plaintiff.
It should be observed that the Rule refers to ―anything likely to do mischief.‖ Although in
Rylands v. Fletcher it was water which escaped, the Rule equally applies in other instances
involving the escape of obnoxious fumes, poisonous leaves on the branch of a tree, bees from a
bee-farm, electricity etc.
Limits of the Rule:

The application of the Rule in Rylands v. Fletcher is not automatic. The following conditions
must be satisfied before the rule can apply:-
(i) Non-Natural User:

There must be a non-natural user of land, i.e. the defendant must have used his land in a way that
is not ordinarily natural. In other words, there must be an artificial accumulation of things not
naturally found on the defendant‘s land; this is the basis of the Rule; just as there was an artificial
accumulation of water in a reservoir by the defendants in Rylands v. Fletcher: the water was not
naturally found on the defendants land and by bringing, collecting and keeping it there the
defendants had engaged in a non-natural user of their land. Another instance is afforded by the
following case:
Crowhurst v. Amersham Burial Board, (1878)
The defendant had on his land a tree with poisonous leaves, branches of which projected onto the
plaintiff‘s land. The plaintiff‘s horse ate the poisonous leaves and died. Held: The defendant was
liable under the Rule in Rylands v. Fletcher.
Note: In the above cases, the keeping by the defendant of a tree with poisonous leaves was
considered a non-natural user of his land.
(ii) Need for Escape:

There must be an actual escape from the defendant‘s land. Thus, the non-natural user of land
must be accompanied by an escape of the thing which is the source of the mischief in question. It
will be recalled that in Rylands v. Fletcher the water did escape from the defendant‘s land to the
plaintiff‘s mine. Indeed, for the Rule under consideration to apply, it is not sufficient that there
was an escape; the escape must be from the defendant‘s land to a place outside it, otherwise if
the thing escapes and causes damage within the defendant‘s land, the Rule does not apply:
Read v. J. Lyons & Co., (1947)
The defendants were authorized by the Minster of Supply to manage and control a munition
factory for the purpose of manufacturing high-explosive shells for the government. The plaintiff
was in the defendant‘s shell-filling shop when an explosion occurred, killing one person and
injuring several others, including the plaintiff. In her action against the defendants the plaintiff
sought to rely on the Rule in Rylands. v. Fletcher. Held: Escape for the purpose of the Rule in
Rylands. V. Fletcher means escape from land in the occupation or control of the defendant to a
place outside it; and since the plaintiff was injured while on land under the occupation and
control of the defendant; there was no escape and the Rule did not therefore apply.
(iii) Natural User of Land:

We saw above that one of the conditions for the application of the rule is that there must have
been a non-natural user of the land. Where there is a natural user of the land, the rule does not
apply and the defendant is protected against the Rule. It is pointed out:‖It is not every use to
which land is put that brings into play that principle. 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.” This is why the plaintiff‘s action did not
succeed in the following case:
Ross v. Fedden, (1972)
The supply and overflow pipes of a water-closet burst, flooding the premises of the plaintiff
which were on the lower floor of a house shared with the defendant. Held: The pipes, being for
the convenience and use of the defendants, were a natural user of the premises and there could be
no liability under the Rule.
(iv) No Escape
Also given as one of the conditions for the application of the Rule is the need for an escape. The
absence of escape is therefore a possible defence available to the defendant, as in Read v. J.
Lyons & Co.
Defences in Rule in Rylands v. Fletcher:

The case of Rylands v. Fletcher itself suggested three defences available to a defendant in an
action brought against him under this Rule. These are:
(a) Plaintiff’s Fault:
Where the escape in question resulted from some fault on the part of the plaintiff, this may be
pleaded by the defendant as a defence to an action brought against him by the plaintiff under the
Rule. For in this case the plaintiff has himself brought about his own suffering.
(b) Act of God

Act of God is also defence to an action brought under the Rule.
(c) Act of Stranger

Where the escape is caused by the intervention of person over whom the defendant has no
control and whose intervention was not foreseeable, this is a defence to an action brought under
the Rule, particularly where the stranger‘s act was deliberate or intentional:
Rickards v. Lothian (1913)
The plaintiff leased second-floor offices in a building occupied by the defendant. His stock-in-
trade was seriously damaged by water from a fourth-floor lavatory basin. The outlet of the
lavatory basin had been plugged with nails, soap, penholders and string and its tap had been
turned fully on. According to the defendant‘s caretaker all was well when he left the place the
previous evening. But it was clear that the plugging of the outlet and the turning of the tap was
the malicious act of some person. Held: The escape of water had been caused by the malicious
act of a third party over whom the defendant had no control; the defendant could not therefore be
liable under the Rule in Ryland v. Fletcher.
The above case pointed out, however, that even if the escape of the water had been caused by the
defendant this would still not be a proper case for the application of the Rule in Rylands v.
Fletcher. The reason for this is given below:
In addition to above defences, some general defences like ―volenti non fit injuria”, statutory
authority are also available in this rule.
The Rule in Rylands v. Fletcher can also apply in the following cases:
The liability for fire
The liability for animals
The liability for fire due to negligence is actionable in tort. It is also a case of strict liability.
Similarly, if a fire starts without negligence but is spreads due to negligence of a person then that
person will be liable for damages caused by the spread of the fire.
The liability for animals may arise in both nuisance and negligence. An occupier of land is liable
for damage done by his cattle if they trespass on the land of his neighbors and thereby cause
damage. Similarly, a person who keeps dangerous animals like lions, leopards, dogs etc is liable
strictly for any injury by such animals, even in the absence of negligence.
SPECIFIC TORTS
The word tort refers to civil wrongs committed by different persons. Some specific torts are:
(a) Trespass
(b) Nuisance
(c) Negligence
(d) Defamation
The main characteristics of these torts together with damages and their defences are explained as
under:
TRESPASS
There are three types of trespass. These are:-
Trespass to Land;
Trespass to the Person; and
Trespass to Goods
Trespass is actionable per se i.e. without proof of any damage: once it is established that a
trespass has been committed, the plaintiff is entitled to legal redress, whether or not he has
suffered damage; the actual damage suffered (if any) merely gauges the extent of the redress (or
compensation) which the plaintiff is entitled to. Trespass, as such, is a classic illustration of the
Principle ‗injuria sine damno‘. It is this fact that distinguishes it from negligence which is
actionable only upon proof of damage.
Trespass to Land
Trespass to land is committed where the plaintiff‘s possessions of land is wrongfully interfered
with. It is the fact of possession rather than ownership that is important; as such the plaintiff may
be anyone in possession of the land, whether he is the owner or a tenant. Wrongful interference
with possession in relation to the plaintiff‘s land may take the form of wrongfully entering upon
it, or wrongfully remaining on it, or wrongfully placing or projecting any material object on it.
Trespass by Wrongful Entry

This is committed where there is physical contact with the plaintiff‘s land, however slight. It
includes acts like encroaching on the land or walking through it without authority, sitting on the
plaintiff‘s fence or putting a hand through his window etc. Also an abuse of a right of entry may
constitute a trespass, e.g. a person authorized to enter premises for the purpose of repairing them
becomes a trespasser when he picks and eats fruits on the premises without authority. If a person
misuse this authority, it is also known as trespass.
Trespass by remaining on land
This type of trespass is committed by a person who, having been originally authorized to enter
upon land, is subsequently asked to leave: such person becomes a trespasser when he fails to
leave the land within a reasonable time.
Trespass by placing things on land:

Trespass by placing things on land is committed by him who places any material thing on the
plaintiff‘s land, or who allows such material thing or noxious substance, to come into contact
with (or cross the boundary of) the plaintiff‘s land. This type of trespass is similar to nuisance,
but the two are different in the following respects:
In trespass the injury is direct since it affects the plaintiff‘s possession; but in nuisance the injury
is indirect because it is the plaintiff‘s comfort and convenience in the use and enjoyment of his
land that is affected, rather than its possession.
Another distinction arising from the explanation given above is that while trespass relates to
possession of land, nuisance relates to the user or enjoyment of land: in trespass the plaintiff
possession is at stake, while in nuisance it is the use and enjoyment of the land that is at stake.
Trespass is actionable per se, whereas nuisance, just like negligence is only actionable upon
proof of damage. The following case is instructive.
Kelsen v. Imperial Tobacco Co. Ltd, (1957)

The defendant erected an advertising signpost which protruded by 8 inches into the air-space
above the plaintiff‘s land. Held: The defendant‘s act constituted a trespass but not a nuisance
since the plaintiff had suffered no inconvenience.
Continuing Trespass
As long as the act constituting a trespass remains, without the trespasser doing anything to avoid
it, there is said to be a continuing trespass. This arises where, for instance, the trespasser chooses
to remain on the plaintiff‘s land or fails to remove there from any matter that is the cause of the
trespass. Where there is a continuing trespass, the plaintiff may bring a number of actions against
the defendant. This is because as long as the trespass continues, the plaintiff continues to suffer
and there is always a fresh cause of action.
Trespass by Relation
The plaintiff‘s possession of land relates back to the time when he first acquired a right to posses
the land and he is deemed to have been in possession of it from that time. A possessor of land
may therefore sue any person who committed an act of trespass on the land even before he
himself took actual possession of it. Since the plaintiff‘s right of action is based on a title which
legally relates back to an earlier period, the trespass in question is known as trespass by relation.
It is all based on the doctrine of relation back. Example: A owns land which he sells off to B. A
year passes before B has taken actual possession of the land; but in the meantime C has
committed an act of trespass on the land; B may sue C for trespass notwithstanding that he had
not yet taken possession of the land when the act of trespass was committed; B‘s title relates
back to the time when he first became entitled to take possession i.e. the time when he bought the
land from A.
Is Trespass a Crime?
Trespass to land is normally a civil wrong, but it may give rise to criminal proceedings in some
cases. The Trespass Act (Cap. 294) states that a trespasser can be prosecuted criminally if he
enters on somebody‘s land with an intent to steal goods or commit any other offence. Otherwise,
a trespass to land is a tort and it is actionable per se, i.e. without proof of special damage.
Defences:
The main defences to an action for trespass to land are as under:-
(i) Prescription
Land acquired by possession is also said to have been acquired by prescription. The new owner
may plead title by prescription as a defence to an action brought by the previous owner to
recover the land. A defendant may also lead
prescription, as by proving a right of common grazing or right of way over the plaintiff‘s land.
(ii) Act of Necessity:
The necessity may be pleaded as a defence to an action of trespass to land e.g. entry to put out
fire for public safety.
(iii)Statutory Authority
Where the authority is conferred by law, whether by statute or by court order, this is also an
available defence e.g. the authority of a court broker.
(iv)Entry by Licence
An entry authorized or licensed by the plaintiff is not actionable in trespass unless the authority
or licence given is abused.
Remedies
The remedies in respect of trespass to land include:
(i) Damages:
The plaintiff may recover monetary compensation from the defendant, the extent of which
depends on the effect of the defendant‘s act on the value of the land in question.
(ii) Ejection:
We saw earlier on that a person is entitled to use reasonable force to defend his property. Thus,
where a person wrongfully enters or remains on another‘s land, he may be ejected using
reasonable force; unreasonable force may entail liability for assault. An ejectment may also be
based on a court order (an eviction order).
(iii)Action for Recovery of Land
The plaintiff may bring an action to recover his land from the defendant where there has been a
wrongful dispossession. It is common for such action to be coupled with the above two remedies.
(iv)Injunction
In addition to the above remedies, an injunction may be obtained to ward off a threatened
trespass or to prevent the continuance of an existing one.
(v) Distress Damage Feasant

In the case of trespass by placing things on land (or on the case of chattle trespass) the plaintiff
has a right to detain the defendant‘s chattel or animal which is the cause of the trespass in
question.
Trespass to the Person

Like trespass to land, trespass to the person in three-fold. It may consist of assault, battery or
false imprisonment.
Assault:
An assault is committed by a person when he threatens to use force against the person of another,
thus putting the other person in fear of immediate danger; e.g. shaking a fist or pointing a gun
menacingly at the person of another. It is important that the person threatened must be put in fear
of immediate danger, otherwise there will be no assault. An assault is a tort as well as a crime.
Battery:
While assault is constituted by the mere use of a threat calculated to induce fear, battery is
defined as the tactual application of force against the person of another without lawful
justification; e.g. punching the plaintiff‘s nose, smacking his bottoms or slapping him on the
chick, etc. An act can only amount to a battery if it intentional and voluntary. Thus, a person who
suffers injury in the process of scrambling for a taxi will find it difficult to maintain an action for
battery against anyone.
False Imprisonment:
There is said to be a false imprisonment where a person is totally deprived of his freedom
without lawful justification. Whether physically or otherwise; e.g. locking up a person in a room
whose only exist is the locked door, or surrounding him such that it is practically impossible for
him to leave where he is, or telling him that if he leaves where he is standing he will be shot
using a gun which he knows to be physically present at that time. It is interesting to note that a
false imprisonment may be committed even without the plaintiff‘s knowledge, e.g. by locking
him up in his bedroom while he is asleep and then reopening the door before he has awoken. On
being informed of these facts the plaintiff may sue the person who did the locking and reopening
of his bedroom. The length of time during which a false imprisonment lasts is immaterial but is a
relevant factor in gauging the extent of the defendant‘s liability in damages.
Defences:
(i) Parental Authority
A parent has a right to reasonably chastise or discipline his children. This means that where a
parent beats his child or locks him up in room for some time by way of reasonable chastisement,
he cannot be sued for battery or false imprisonment. Similarly, if a parent gets a knife and
threatens that he will cut off his child‘s mouth unless the child stops abusing grown-ups, no
action can be brought against him for assault.
When a child is at school all his parent‘s rights of ordinary control over him are delegated to the
school authority (or teachers) and are exercised by the latter in ‗loco parents‘. Reasonable
chastisement by the school authority, e.g. reasonable punishment by teachers, is not actionable in
tort.
Note: According to R.v. Jackson (1891) a husband has no right to chastise his wife.
(ii) Judicial Authority:
An act done under order of court is not actionable as a trespass. We saw at the beginning of this
Chapter that acts done in a judicial capacity are not actionable in tort. If follows that where a
judge orders a corporal punishment of a number of strokes, no action for battery can be brought
against him or the person administering the strokes.
(iii)General Defences
The defendant may also rely on the general defences already considered. Self-defence is a
particularly viable defence to assault and battery. Volenti (or the plaintiff‘s consent), may also be
pleaded. Thus, a patient who has consented to a medical operation cannot turn round and sue the
surgeon for trespass (battery). Similarly, a player or spectator who suffers injury in the course of
a game whose rules are being followed cannot sue for trespass. Also, statutory authority may be
pleaded as a defence.
Remedies:
(i) Damages:
An award of damages is the most obvious and usual remedy. The amount of damages awarded
depends on the circumstances of each case, having regard to matters like the injury suffered, the
period of false imprisonment etc.
(ii) Habeas Corpus:

The Writ of Habeas Corpus is a remedy to false imprisonment. The writ directs the person in
whose custody the applicant is detained to produce him before the High Court; the Court may
order his release if it appears that there are not sufficient grounds for detaining him.
Trespass to Goods, Conversion and Detinue

Trespass to Goods
A trespass to goods is committed by a person who directly and intentionally interferes with
goods in the possession of another without lawful justification. The plaintiff may be a person
either in possession or entitled to immediate possession of goods. The wrongful interference may
be constituted by removing the goods from one place to another (e.g. taking them away from the
plaintiff‘s possession), using the goods (e.g. wearing the plaintiff‘s shirt), or destroying or
damaging the goods (e.g. tearing the plaintiff‘s shirt).
There are three points to note about this tort. Firstly, like in any other trespass case, the act
complained of (the interference in this case) must be direct, unlike in nuisance where the act of
interference, or the injury, is indirect. Secondly, it is possession rather than ownership that
determines the plaintiff‘s right of action; it is a possessor‘s (as opposed to an owner‘s) rights that
are protected. And thirdly, the defendant‘s act must be deliberate or intentional; and this
distinguishes the tort from negligence where an intentional wrong is not actionable.
Note: A finder of lost property is not liable for trespass where the owner of the property is not
known to him and cannot be easily ascertained.
Conversion:
Like trespass to goods, conversation is based on possession and is actionable only if the
defendant‘s act was intentional but not where the defendant was merely negligent. Conversation
is constituted by a dealing with goods in a manner that is inconsistent with the rights of the
person in possession of the goods or entitled to their immediate possession, e.g. where A
intentionally sells B‘s goods to C without any authority from B, or where A intentionally delivers
B‘s goods to some other person without any justification at all. Every person is presumed to
intend the natural and probable consequences of his intentional acts, and it follows from this that
where a person used the property of another in such a way as to risk its confiscation he is liable
for its conversation.
Moorgate Mercantile Co. v. Finch, (1962)
A borrowed a car from B. He used the car to smuggle contraband watches, and in the process he
was arrested and the car confisticated. Held: A was liable for conversion of the car because he
had intentionally acted in a manner that was most likely to lead to its confistication.
Instances of conversion do commonly overlap those of trespass. But it must be remembered that
there are certain acts which are actionable strictly as trespass but not as conversion. In
conversion there is a denial of the plaintiff‘s title, but this is not necessarily so in trespass.
Moreover, it is common for conversion to be committed by a person in possession of the goods
in question (e.g. a bailee) but it would be unusual for such person to commit a trespass on the
goods. Where the tort of conversion is established, the damages awardable equal the value of the
goods converted, while in trespass this is not necessarily the case.
Detinue:
Detinue is committed where goods are wrongfully withheld or detained from a person entitled to
their immediate possession, including a withholding by a bailee from a bailor. Thus, where A
borrows a hoe from B and subsequently fails or refuses to return it to B when its return is due, B
may sue A for detinue and A will be liable even where the hoe is proved to have been stolen
from him at the time when its return was due. But before the action can be maintained, it must be
proved that B demanded a return of the hoe and A failed and/or refused to return it. Detinue has
an advantage over conversion in that it entitles the plaintiff to have the goods specifically
delivered to him and it is only where this is not feasible that damages may be awarded instead.
Conversion, on the other hand, is primarily remedied by an award of damages.
Defences:
Not many defences are available to a defendant in an action brought in respect of a wrong to
goods. But where the defendant has a right to possess the goods he has a good defence, e.g. a
seller exercising a right of lien. Besides, general defences like statutory or judicial authority may
be relied upon.
Remedies:
If the plaintiff succeeds he can recover either the goods or their value. He can claim the full
value of goods and damages for any inconvenience suffered by him. The court may also order at
its discretion specific restitution of the goods if the award of damages is not an adequate remedy.
NUISANCE
This tort is committed whenever a person is wrongfully disturbed in the use and enjoyment of his
land. Generally, it arises from the duties owed by neighbouring occupiers of land: no one should
use his property in a way which is likely to affect his neighbours use of his own land. Thus, if A
and B are neighbours, and A owns plot X while B owns plot Y, A may use plot X in any way he
chooses but he must not in doing so affect B‘s use of plot Y, or else he will be liable in nuisance.
Although the tort of nuisance is usually committed only where the plaintiff and defendant are
owners or occupiers of land, in certain circumstances the tort may be committed in places like a
highway or even a river. There are two types of nuisance: private nuisance and public nuisance.
Private Nuisance:
A private nuisance is committed where a person‘s private rights in his land are wrongfully
disturbed, whether physically or by allowing noxious things to escape on to his land. Thus, it is
nuisance to obstruct an easement or private right of way; or to allow a weak structure to hang
precariously above the plaintiff‘s land, thereby creating a potential source of danger to the
plaintiff; or to allow smoke, noise, gas, fumes etc., to escape onto the plaintiff‘s land thereby
inconveniencing him; etc.
The plaintiff was a breeder of silver foxes, which were very sensitive to any disturbance during
breeding seasons. The defendant was developing the neighbouring land as a housing estate and
thought that the plaintiff‘s business might discourage his customers. He instructed his son to fire
a gun near the fox cages. The son did so and after four days the plaintiff sued. Held: The act of
the defendant through his son amounted to a nuisance.
Public Nuisance:
Public nuisance is also known as common nuisance. It affects the comfort and convenience of a
class of persons but not necessarily every member of the public. Thus the obstruction of a
highway is a public nuisance, and also a music festival accompanied by large scale noise. It is
also a public nuisance to do any act which is a source of danger to the public, e.g. releasing a
large quantity of petrol onto the highway. In all these cases, it is not the private rights of an
individual that are affected, but the comfort and convenience of the community around or the
public at large.
From what is stated above, it is clear that it would not be reasonable to allow an individual to
bring an action to stop the nuisance. Indeed, a public nuisance is generally a criminal offence and
only the Attorney General may bring an action against the wrongdoer. However, in exceptional
circumstances, a private individual may bring an action in tort against the person creating such
an act of nuisance, if he can prove that he has suffered some special damage over and above that
suffered by the general public.
Soltan v. Held, (1851)
The Plaintiff resided next to a Roman Catholic Chapel. The defendant, a priest, took it upon
himself to ring the chapel bell throughout the day and night. The plaintiff brought an action to
stop it. Held: The ringing of the bell was a public nuisance but since the plaintiff‘s house was
next to the chapel he suffered more than the rest of the community and was therefore entitled to
bring an action to stop it. \
Continuing Wrong:
Generally, nuisance is actionable only when it is a continuing wrong. A disturbance or
inconvenience on an isolated occasion will not ordinarily be treated as a nuisance.
Bolton v. Stone, (1951)
The plaintiff, while standing on the highway just outside her home, was injured by a cricket ball
struck from the defendant‘s ground which adjoined the highway. The ground had been used for
cricket for over 80 years and it was very rare for balls to be hit over the fence, which was 10 feet
high above the highway and 17 above the pitch. The ball had traveled over 100 yards before
hitting the plaintiff. Held: An isolated act of hitting a cricket ball onto the highway in
circumstances like those of this case could not amount to a nuisance.
It is only in very exceptional circumstances that an isolated act may entail liability in nuisance.
An example of this is afforded by Rylands v. Fletcher where, as we saw above, water escaped
only on one occasion causing damage to the plaintiff‘s mine.
NEGLIGENCE
Negligence is one of the most important torts in the law. It was defined by Judge Alderson in
case of Blyth v. Birmingham Waterworks Co. (1856) in the words:
“The omission to do something which a reasonable man, guided upon those considerations
which ordinarily regulate the conduct of human affairs, would do, or doing something which a
prudent and reasonable man would not do”.
As a tort, negligence consists of the following three elements:
The Duty of Care
Breach of the Duty of Care
Injury to the plaintiff
These three elements must all be established before the defendant can be made liable. We shall
now consider them in turn.
The Duty of Care:

Lord Atkin defined a duty of care in Donoghue v. Stevenson (1932) as the duty to take
reasonable care to avoid acts or omissions reasonably foreseeable as likely to cause injury to
your neighbour. This raises the question: who is my neighbour? Lord Atkin goes on to say that
your neighbour in law is a person who is so closely and directly affected by your act that you
ought reasonably to have him in your contemplation.
In the case of a driver every other road user (including his own passenger and also a pedestrian)
is his neighbour in law; the driver owes all these others a duty of care; the duty to have regard to
them and to drive or use his vehicle safely. An employee is his employer‘s neighbour in law; the
employer owes him a duty of care; the duty to maintain a safe system of work. A patient, too, is a
neighbour in law to the hospital authority responsible for his treatment; the hospital owes him a
duty to avoid act that might be injurious to his health. Also, an occupier of premises owes his
visitors a duty to maintain the premises in a safe condition or good state of repair, while a
manufacturer or producer of goods owes his consumers a duty to ensure that his goods are free
from anything that might cause damage or injury to the consumers. As we said in the case cited
above, whose facts are given below, ―a manufacturer of products, which he sells in such a form
as 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 hat the
absence of reasonable care in the preparation or putting up of the products will result in an
injury to the consumer’s life or property, owes a duty to the consumer to take the reasonably
care. Besides professionals like advocates, accountants, doctors, bankers, valuers, stock brokers,
etc., owe their clients a duty to take reasonable care in the transaction of the client’s business,
failure to do which may entail liability in negligence. Indeed, the circumstances in which a duty
to care may arise, and with it liability in negligence, are numerous and cannot all be enumerated
here.
Breach of the duty:

It is important to distinguish between the duty of care and he standard of care. The duty of care,
as we have seen, answers the question whether the defendant was under any legal obligation
towards the plaintiff. The standard of care, on the other hand, is a yardstick by which the
defendant‘s conduct is measured; it answers the question whether the defendant did what a
reasonable man would have done in the circumstances. Thus, the standard of care required of
every person is that of the reasonable man.
The duty of care is said to be breached where the defendant fails to exhibit that standard of care
required of him. In other words, the defendant is said to have breached his duty of care where a
reasonable man in his position would not have done what he did.
It remains to consider who is a ―reasonable man”. Generally, a reasonable man is a man of
ordinary prudence. At least one judge has described him as the ―man on the City bus.” Thus, in
looking for the reasonable man we do not look for a person possessed of any special attributes or
qualities; but it all depends on the circumstances of each case. In an accident case, for instance,
the question to be asked is: What would a reasonable driver, property directing himself, have
done in the circumstances? In which case what has to be borne in mind is an ordinarily prudent
driver, not necessarily one who has been to a driving school. But where a person professes to
have some specialized knowledge or skill, e.g. an advocate, accountant or a doctor, the standard
of care required of him is not that of the man on the city bus; rather he must do what a reasonable
advocate, accountant or doctor, properly directing himself, would have done in the
circumstances.
Injury to the Plaintiff:
Proof of the existence of a duty of care on the part of the defendant, and its breach by the
defendant, is not enough to establish liability in negligence. The plaintiff must go further and
prove that he has suffered damage, or injury, as a result of the defendant‘s breach of his duty of
care. But even then, the plaintiff can only recover damages for injuries suffered if a reasonable
man in the defendant‘s position ought to have foreseen that his act or omission would result in
injury to the plaintiff. The test applied is therefore that of foreseeability. Any injury that was not
reasonably foreseeable is said to be too remote and cannot be recovered by the plaintiff.
Cases on Negligence Generally:
Donoghue v. Stevenson, (1932)
A man bought from a retailer a bottle of ginger-beer manufactured by the defendant. The man
gave the bottle to his lady friend who became ill from drinking the contents. The bottle contained
the decomposed remains of a snail. The bottle was opaque so that the noxious substance could
not have been seen and was not discovered until the lady was refilling her glass. The consumer
sued the manufacturer in negligence. Held: (by the House of Lords): that the manufacturer was
liable to the consumer in negligence.
Bourhill v. Young, (1943)

The plaintiff, a pregnant woman, heard the noise of a road accident some distance away and
walked to the scene. On reaching there she suffered nervous shock and subsequently miscarried.
Held: The plaintiff could not recover in negligence because the injury she suffered, or the
manner in which it was caused, was not foreseeable.
Note: Had the plaintiff not walked to the scene of the accident she would not have suffered the
injury complained of. Her injury was therefore not foreseeable. Compare the following two
cases:
Dulieu v. White & Sons, (1901)
The plaintiff a pregnant woman was sitting behind the counter of her husband‘s bar when
suddenly a horse was driven into the bar. Fearing for her personal safety she suffered nervous
shock and gave birth to a premature baby. Held: The plaintiff was entitled to recover in
negligence.
Hambrook v. Stokes, (1925)
The defendants left their lorry at the top of a steep hill. Soon, it began to run away down the hill.
He plaintiff‘s wife, who had left her children round a corner, received a severe nervous shock for
fear o her children‘s safety; and as a result, she died. Held: The defendant was liable.
The Wagon Mound (No. 1), 1961):
A large quantity of oil was allowed to spill from The ―Wagon Mound‖, a ship under the
defendant‘s control, during bunkering operations in Sydney Harbour. The oil spread to the
plaintiff‘s wharf some 200 yards away where a ship, ―The Corrimal‖, was being repaired. The
plaintiff was assured according to the best scientific opinion, that the oil could not be ignited
when spread on water and that welding operations could therefore go on. Nevertheless, a drop of
molten metal, upon falling on a piece of floating waste, ignited the oil and the plaintiff‘s wharl
was damaged by fire. Held: The test of liability for fire was foreseeability of damage by fire; but
damage by fire was not foreseeable in the circumstances of this case and the plaintiff‘s action
could not thereafter succeed.
The Wagon Mound (No. 2), (1967):
The defendant in the above case, The Wagon Mound (No. 1), were subsequently sued by the
owners of the ship (the Corrimal) which was being repaired in the wharf, which also got
damaged as a result of the fire. The court adopted the same test of liability, but Held: The fire
was foreseeable and the defendant was liable in negligence.
Note: Although The Wagon Mound (No. 1) has not been overruled, doubt has been cast on it by
The Wagon Mound (No. 2) which came to a contrary conclusion on the same facts.
Fatal Accidents Where the Victim of Negligence is dead:
Negligence sometimes results in the death of the victim. In such cases, obviously the victim
himself cannot sue. But this does not mean that the tortfeasor is left free. The action is brought
for the benefit of the members of the victim‘s family and may be instituted by his executor or
administrator or by and in the names of the members of his family. These provisions are similar
to hose of the English Fatal Accidents Acts on which Hambrook v. Stokes was based (in that
case, whose facts are given above, it was the victim‘s husband who sued).
DEFAMATION
Meaning of “Defamation”
The tort of defamation is constituted by the publication of a false statement, without justification,
which tends to lower the plaintiff‘s reputation in the estimation of right-thinking members of
society or to injure him in his office, trade or profession, or which causes him to be shunned or
avoided. No person should therefore publish a false statement which adversely affects the
reputation of another, if such statement is without justification; or he may do so only at the risk
of incurring liability for defamation. Instances of defamation are given in the cases cited below.
Elements of Defamation:
The defendant must have made a false statement. This is important because no action may be
maintained by the plaintiff on the basis of a true statement.
The statement must be defamatory. This means that it must be such that its effect is to arouse
odium, contempt or ridicule from right-thinking members of society. In other words it must tend
to lower the reputation of the person referred to in the estimation of such members of society.
Thus, where A makes a statement that B has VD or AIDS, or that B is a criminal or a crook, or
untrustworthy etc., and right-thinking members of society react to the statement by shunning or
avoiding B, or ridiculing him etc., clearly such statement is defamatory and A may only escape
liability, if he can successfully rely on one or more of the defences which are discussed below.
A statement may be defamatory in the natural sense of the language used. This is so where the
statement directly imputes some state (e.g. disease) or misconduct on the person referred to.
Sometimes, however, a statement may be defamatory indirectly or in a roundabout way. The
defamatory matter is merely alluded to without any explicit statement. A statement which
indirectly refers to a particular matter is called an innuendo and the defamation constituted by it
is defamation by innuendo:
Cassidy v. Daily Mirror Newspaper Ltd. (1929)
The defendants published a statement that the plaintiff‘s husband was engaged to some third
party. The plaintiff was at that time living apart from the husband and the defendants got heir
information solely from the husband. The plaintiff alleged that the defendant‘s statement bore the
innuendo that she lived with a man not her husband in immoral cohabitation. Held: The
defendant‘s statement conveyed to reasonable persons a bad effect on the plaintiff‘s moral
character; the innuendo alleged by the plaintiff was therefore established and the plaintiff was
entitled to succeed in her action against the defendants.
The defamatory statement must refer to the plaintiff. In addition to the above two elements, the
plaintiff must prove ht the statement complained of refers to him. But the plaintiff need not have
been specifically named; it is sufficient if right-thinking members of the society understand the
statement to refer to him. Thus, a plaintiff will have a cause of action where either he was
specifically named or where (for instance) the defamatory statement was accompanied by a
cartoon which may easily be connected with the plaintiff.
Once a defamatory statement is understood to refer to the plaintiff, the defendant will be liable
notwithstanding that it was not his intention to defame the plaintiff and it makes no difference
that he did not even know of the plaintiff‘s existence:
Jones v. Hulton, (1910)
A newspaper published an article by a foreign correspondent, part of which read ―There goes
Artemus Jones with a woman not his wife”, describing Artemus Jones as a church warden living
in Pecham. The statement was mere fiction intended to colour the article and the correspondent
did not know anybody called Artemus Jones. But in the area where the newspaper circulated
there happened to be a lawyer by those names who had previously contributed articles for the
same paper. Held: The statement was defamatory of the plaintiff and the defendant newspaper
was liable.
The above case laid down the principle that an author or publisher may be liable to pay damages
to the plaintiff even where there was not intention to defame the plaintiff or even in the absence
of negligence; if reasonable people would think the language to do defamatory of the plaintiff it
is immaterial that the defendant did not intend to defame him. This principle has since been
narrowed in scope by the following case:
Newstead v. London Express Newspaper Ltd. (1940).
The defendant published a statement that one Harold Newstead had been convicted of bigamy.
This was true of a barman in Camberwell by those names but to true of the plaintiff who also
resided in Camberwell and shared the same names. Held: The statement was defamatory of the
plaintiff and the defendant was liable.
According to Newstead‘s Case the principle laid down by Jones v. Hulton applies where the
statement in question refers to a real person, A, but is mistakenly though reasonably taken to
refer to another person B.
The defamatory statement must be published. A cause of action accrues to the plaintiff only upon
publication of the defamatory statement. Such application must be made to a third party. Where
the defendant keeps the statement under lock and key and no one ever gets to read it, or where he
matters it to himself, or where he communicates it to the person of whom it is made and no one
else, no defamation is committed. Thus, if there are only two persons in a room, A and B and A
tells B that B is a common thief or that he believes B has VD, B cannot sue him for defamation.
Publication to a single individual is enough to find a cause of action. But communication
between spouses (husband and wives) are absolutely privileged. Thus, if A tells his wife that B is
a very dangerous character who ought to be relieved of his public office in the pubic interest, B
cannot sue A for defamation.
Function of the Law of Defamation

The law of defamation protects a persons‘ reputation. Every person has right to a good name and
no one should unduly interfere with this right. It also protects a person‘s business interest. This is
why a false statement which tends to injure the plaintiff in his trade, occupation or profession is
actionable in defamation. Finally, the law of defamation plays a role in the maintenance of law
and order. This is achieved by giving the plaintiff a remedy (or remedies) instead of leaving him
to take the law into his own hands.
Types of Defamation
(a) Slander:
Defamation in a transient or non-permanent form, including defamation by word of month, is
known as slander. As already pointed out, slander is actionable only upon proof of damage, the
plaintiff‘s action can be sustained only if he proves that he has suffered some damages as a result
of the defendant‘s defamatory statement. In exceptional circumstances a slanderous statement is
actionable without the need of proving damage. These exceptional circumstances are as follows:
Where the statement imputes a criminal offence punished by imprisonment.
Where the statement imputes a contagious disease on the plaintiff:
Lords Bar v. People Newspaper, (1972)
After a reporter from the defendant newspaper had visited the Lords Bar a statement appeared in
the paper alleging that all the ladies in that bar had V.D. (venereal disease) and that the manager
of the bar and one of the bar-maids sued. Held: The plaintiffs were entitled to damages and there
was no need to prove damage.
Where the statement imputes unchastity on a woman.

Where the statement imputes incompetence on the plaintiff in his trade, occupation or profession.
(b) Libel:
Libel differs from slander in the following respects. First, it is defamation in a permanent or non-
transient form, including written matter like a letter or an article, scandalous pictures
(particularly where they are accompanied by a defamatory statement), film or news tapes etc.
Where defamatory matter is dictated to a secretary and she subsequently transcribes it, the act of
dictation constitutes a slander while the transcript is a lible. Secondly, while slander generally
requires proof of damage before it can be made actionable, libel is actionable ‗perse’ (i.e.
without proof of damage). Once a libel is established, the plaintiff has a cause of action whether
or not he has suffered damage.
Defamation of a Group (or Class)
Where a defamatory statement is made of a large group or class of persons, it is not actionable.
Thus, where a statement is made to effect that ―all lawyers are liars”, or “all accountants are
thieves” or ―all Nairobi women are loose” no single lawyers, accountant or Nairobi woman may
sue on it in defamation:
Knupffer v. London Express Newspapers (1944)
The defendant newspaper commented adversely on the activities of an association which had a
wide membership in several countries and only 24 in the U.K. The chairman of the U.K. branch
complained that this article was an attack on him personally. Held: The Chairman‘s action could
not be sustained, because when defamatory words are written or spoken of a class of persons it is
not open for a member of that class to say that the words were written or spoken of him as an
individual.
But where the defamation relates to a small group or limited class of persons it is capable of
affecting each of the members of the group or class as an individual, and he may sue:
Kigozi v. The Hon. Abubakar Mayanja (1965)
The defendant read a speech alleging that some members of the Board of Directors of a certain
company were taking money out of the country for their own use. There were 8 members on the
Board, including the plaintiff who subsequently brought an action in his own name. Held: The
plaintiff‘s action would be upheld because the group in question (members of the Board) was so
small that the defendant‘s statement was capable of defaming each one of them. ‖There may be
something in the defamatory matter or in the circumstances in which it is published which
indicates that particular individuals are defamed, although they are not named. Defamation of a
body of trustees or directors involves defamation of each member thereof”.
Repetition:
Every repetition of defamatory matter constitutes a fresh cause of action and anyone who repeats
it may be sued. A person who takes part in the distribution of such defamatory matter, whether
by way of sale (in the case of a newspaper) or otherwise, is equally liable for defamation.
Defences:
A number of defences are available to a defendant sued for defamation. The most obvious ones
arise from the elements of the tort. Thus, the defendant may in appropriate circumstances plead
that there was no publication of the matter complained of, or that the matter is not defamatory, or
that it does not refer to the plaintiff, or (in ordinary cases of slander) that no damage has been
suffered by the plaintiff. In addition, the defendant may avail himself at least one of the general
defences e.g. consent of the plaintiff to the publication of the matter complained of. Besides
these, there are certain defences which have particular relevance to this tort:
(a) Justification:
Truth, or justification, may be pleaded as a defence where the matter complained of is true and
the defendant can prove that it is true. In case the defendant fails to establish the truth of the
matter, the case against him becomes more serious and aggravated damages may be awarded
against him.
(b) Fair Comment:
Fair comment on a matter of public interest is another defence available to the defendant in a
defamation suit. There must be facts, truly stated, on the basis of which a comment is made; and
the facts must not be mixed up with the comment in such a way that it is difficult to distinguish
the one from the other.
(c) Absolute Privilege:

Certain matters are not actionable at all in defamation, and are said to be absolutely privileged.
They include statements made by judges or magistrates in the course of judicial proceedings as
well as those made by members of parliament in the course of a parliamentary debate, and also
communications between spouses.
(d) Qualified Privilege:

An occasion is privileged, according to Pullan v. Hill Ltd. (1891) ―when the person who makes
the communication has a moral duty to make it to the person to whom he does make it, and the
person who received it ahs an interest in hearing it.” An example is where a Head of
Department makes a report to his superiors about a subordinate official in his Department. He
has a duty to make such communication to his superiors and the superiors have a corresponding
duty (or interest) to receive it. Newspapers too may avail themselves of this defence where the
matter in question is of public interest, such that they have a duty to communicate it to members
of the public and the alter in turn have an interest in receiving a report of the matter. But the
defendant is protected only where he has stated what he believes to be true about the plaintiff
provided that the statements was made honestly and with a proper motive: Shah v. Consolidated
Printers Ltd. (1971). The defence is not available where the defendant‘s statement is proved to
have been actuated by malice.
(e) Apology or Offer of Amends:
The defendant is at liberty to offer to make a suitable correction of the offending statement
coupled with an apology and/or notice to persons to whom the statement has been published that
the words are alleged to be defamatory of the plaintiff. Such offer may, in appropriate
circumstances, be relied upon as a defence. But an apology is effective only where it is genuine,
not where it is equivocal.
The Defamation Act (Cap. 36) provides that the defendant (a publisher) can make an offer of
amends in the cases when the publication was without malice and it was published innocently.
And as soon as the publisher discovered libel, he offered a suitable apology to the plaintiff.
Remedies:
The following remedies are available to the aggrieved party on the publication of defamatory
statements:
(a) Damages:
In actions of defamation, the plaintiff is entitled to recover damages for injury to his reputation
and also to his feelings; injury to feelings is usually assumed and the plaintiff should recover
damages for mental pain and suffering and anxiety arising out of his fear of the consequences of
the publication, in addition to compensation for the insult suffered and the pain of false
accusation as well as the irritation and annoyance experienced as a result of the defamation. The
extent to which the defamatory matter is circulated is relevant in determining the quantum of the
damages. But the plaintiff must take steps to mitigate the damage occasioned by the defamatory
statement (e.g. by seeking a correction or an apology from the defendant), otherwise and in
particular where no actual damage has been suffered) he is entitled only to nominal damages:
Sekitoleko v. Attorney General (1978). A failure by the defendant to withdraw or retract the
defamatory statement, or to publish an apology, entitles the plaintiff to aggravated damages:
Adimola v. Uganda Times (`1978).
(b) Apology
An apology, particularly where it is not equivocal, is another remedy available to the plaintiff.
This is because it has the effect of correcting the impression previously made by the offending
statement about the plaintiff.
(c) Injunctions
The court may also grant an injunction i.e. to issue the orders for restraining the publication of a
libel. But the plaintiff must first prove that the defamatory statement is untrue and its publication
will cause irreparable damage to him.
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 goods.
(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.
(c) In order to maintain action for defamation, the aggrieved party must establish four
ingredients of defamation. Explain the four ingredients.
(d) 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.
TOPIC 4 LAW OF CONTRACT
General objective
By the end of the lesson the learner should be able to explain the application of the law of contract in
business
Specific objectives
By the end of the lesson the learner should:
a) Explain the essentials of a valid contract
b) Explain how contracts are formed
c) Explain the vitiating elements that may affect the validity of a contract
d) List down the remedies incase of a breach of contract
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).
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.
ELEMENTS OF A CONTRACT
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.
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.
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.
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.
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.
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.
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.
CAPACITY
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.
Contractual 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.
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.
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).
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.
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.
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.
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.
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".
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.
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.
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.
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).
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".
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.
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
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.
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".
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.
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.
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.
ILLEGALITY
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"
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
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:
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.
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".
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.
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.
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.
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.
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.
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.
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.
VITIATING ELEMENTS IN A CONTRACT
The validity of a contract may be vitiated in the following factors:
MISTAKE
This is a misapprehension of a tact or fact situation.

The general rule is that mistake is legally irrelevant: Bell v. Lever Bros.
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.
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.
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.
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
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.
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.
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.
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.
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.
DISCHARGE OF CONTRACT
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 .
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.
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
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).
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.
COMMON LAW REMEDIES
The only remedy available at common law for breach of contract is financial
compensation known as "damages".
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
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.
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
SALE OF GOODS
General objective
By the end of the lesson the learner should be able to explain the importance of the Sale of Goods Act In
commercial circles.
Specific objectives
a) Distinguish between a sale and an agreement to sell
b) Explain the implied conditions and warranties in every contract of sale
c) Explain the doctrine of caveat emptor
d) Explain the rights of sellers and buyers as provided for by the Act
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
STUDY TEXT
Contents
Sales of Goods
Hire-purchase law
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.
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".
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
"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.
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 transit

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-sal
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
1. Outline the ways in which a contract may come to an end".
2. (a) What principles will the court apply when assessing unliquidated damages for breach
of contract?
(b) A, who lives in Nairobi, boards a bus to Mombasa to finalize an important contract
which will bring him a profit of £50,000. The bus breaks down and he reaches
Mombasa very late and loses the contract.
Explain the liability of the bus company.
3 (a) What are the rules which govern the acceptance of an offer?
(b) Mike writes to Peter "I will sell you my car for £ 2,000. If I hear nothing from you
before next Saturday, I will take it that you have accepted". Peter does not reply by
Saturday. Mike is now threatening to sue Peter for breach of contract to buy the car.
Advise Peter.
Topic Six EMPLOYMENT LAW
General Objective
By the end of the lesson the learner should be able to explain the importance of employment act in
determining the relations between employers and employees.
Specific objectives
By the end of the lesson the learner should be able to explain the provisions on various types of contracts
of employment
Explain various pieces of legislation relating to labour in Kenya.

Introduction
This is an area of law which deals with the individual rights and responsibilities as pertains the
employer- employee relationship. While on the other hand, when talking about labor, we are
talking about the collectiveness of the employees.
Employment law is a form of government regulation in the work place which has been justified
greatly on the work position occupied by the employee in the contract. Due to the need to protect
the weaker party, that is, the employee has been justified.
Sources of labor/ Employment law in Kenya
I. The constitution : provides for the employees rights and establishes the Industrial court
II. The Employment Act (No. 11 of 2007): provides the fundamental rights of employees
III. Labor Relations Act (No. 14 of 2007): provides laws concerning trade unions
IV. Labor Institutions Act: Establishes labor institutions in Kenya which include:
 The national Labor Board
 The Industrial Court
 The Registrar of Trade Unions
 Commissioner of Labor
 Director of Employment
 Committee of Inquiry
 Wages Council
V. Work Injury Benefits Act: it provides for compensation of employees for work related
injuries and diseases contracted in the course of employment.
VI. Occupational Health and Safety Act: it provides for the safety, health and welfare of
workers and all persons lawfully present at work places.
Definition of employee and the employer

Section 2 of the Employment Act of 2007 defines an employee as any person employed
for wages or salary and includes an apprentice and indentured learner, and an employer means
any person, or public body or any firm, corporation or company, who or which has entered into a
contract of service to employ any individual and includes an agent, foreman, manager or factor
of such person, public body, firm, corporation or company.
The common law conception of an employee is a person who works under a contract of
service and not a contract for services.
A contract of service is defined under the Employment Act of 2007 as an agreement
whether oral or in writing and whether expressed or implied to employ or to serve as an
employee for a period of time and includes a contract of apprenticeship, indentured learnership
but does not include a foreign contract of service.
Common law has devised various tests for determining whether a contract of service exists or not
and consequently an employer employee relationship:
a) Control test
If a person is under the direction and control of another person in the manner in which he does
his work, then he is under the contract of service and hence an employee. If there is no control,
he is under a contract for service and will be referred to as an independent contractor.
b) Integration test
It is not in all circumstances when a person is under the control and direction of another to be an
employee. An employee may not have control especially for skilled employees such as doctors.
In this instance, to determine the existence of an employer-employee relationship, the question
one ought to ask himself is whether the work done by such a person is integral part of the
business. If it is, then he is an employee.
The test was applied in the case of Cassidy vs. Ministry of Health.
c) Multi factor test
Under this test you look various factors to determine the existence of an employer employee
relationship. e.g.:
 Degree of control\
 Obligation to provide work
 Taxation
 Welfare Provisions
 Provisions of tools, equipment to do work
 Degree of financial risk, etc.
The Employment Contract

Formation
A contract of employment may be:
 Oral
 Written
 Implied
An employment contract is a contract which is essentially governed by the common law rules on
contracts. That is, there must be an offer, acceptance, consideration and the parties must have the
capacity. There must also be the intention to create legal relations and there must be absence of
the vitiating elements of a contract such as misrepresentation, duress and undue influence.
Concerning capacity, the party who is the employee must be above the age of 18 years as per the
employment Act unless the contract is wholly beneficial to the minor.
A contract for employment in a foreign jurisdiction must be in the prescribed form under the Act
and attested by a labor officer. There must be no fraud, duress or coercion into entering into the
contract. The employee must also be medically fit for the work.
Requirements for the Contract of Employment

The employment Act provides that if the duration of the contract of service is the aggregate of
three months or more, then the contract must be in writing.
The following are the requirements of a contract of employment which is in writing:
a) Name, age, permanent address and sex of the employee
b) Name of the employer
c) Description of the employment
d) Date of commencement
e) Form and duration of the contract
f) Place of work
g) Hours of work
h) Remuneration and details and other benefits
i) Intervals of payment of remuneration
j) Conditions of leave
k) Pension Schemes
l) Period of employment
m) Details on place of work
n) Details of collective bargaining agreements
o) Disciplinary rules applicable
Implied terms of Contract of employment

These are terms of contract that are reasonably necessary to give the transactions business
efficacy.
They depend on the nature of the employment contract and the specific facts of each case. They
include:
a) Duty to provide equipment of work
b) Employee to obey reasonable instructions
c) Mutual trust and confidence
Rights and Obligations in a Contract of Employment

1. Obligation to obey reasonable orders:
An employee is under an obligation to obey all reasonable and lawful orders
2. Duty of trust and Confidence
An employee is required not to act in a way that would destroy the trust and confidence
inherent in the employer-employee relationship. He should not disclose confidential
information about the employer‘s business to unauthorized persons.
3. Care and competence
An employee is required to exercise reasonable care and competence in performance of
his duties. Failure to exercise care and competence may lead to dismissal.
4. Non-discrimination
The employment Act requires employers not to discriminate against any employee or
prospective employee on basis of race, religion, color, sex, language, religion, political or
other opinion, nationality, ethnicity, pregnancy, HIV status, mental status or disability.
5. Sexual harassment
If the employer has more than twenty employees, he has a duty to ensure that a sexual
harassment policy is in place. This would prevent and provide disciplinary measures for
sexual harassment at the work place.
6. Duty to pay
The employer has a duty to pay his employees
7. Duty to provide Annual leave
The employer has a duty to provide an annual leave of not less than 21 days after every
12 months of service with pay.
8. Duty to provide maternity/paternity Leave
Female employees are entitled to three months maternity leave with full pay while male
employees are entitled to two weeks paternity leave with full pay.
Other Duties include:

 Duty of the employer to provide sick leave
 Duty of the employer to provide housing
 Duty of the employer to provide water
 Duty of the employer to provide food and utensils
 Duty of the employer to ensure employee‘s privacy
 Duty of the employer to provide work
 Duty of the employer to provide safe working environment.
Termination of Contract of Employment

This is the way in which a contract of employment may be brought to an end.
a) Summary dismissal
This occurs where an employee is dismissed without notice whereby by his conduct he has
fundamentally breached his obligations arising out of the contract of service. The conduct is such
that it warrants dismissing the employee without giving him any notice. Such conduct includes:
i. Misappropriation of employees funds assets
ii. Employee leaking confidential information belonging to the employer
iii. Failure to report to work
iv. Intoxication rendering a person not to work properly
v. Use of abusive language or insulting behavior to the employer
vi. Arrest and detention for more than 14 days.
b) Termination by way of Notice

Either party to an employment relationship can bring to an end by giving notice to the other. The
period of the notice is dependent on the length of the contract of service. The Employment Act
provides that if wages are payable daily, then one day notice. If payable on monthly basis, then
the notice is 28 days.
c) Redundancy (Retrenchment- workforce reduction)
It is the loss of employment, occupation, job or career by means involving no fault of the
employee, involving no fault of the employee, involving termination of the employment at the
initiative of the employer where services of an employee are super flow commonly known as
abolition of office, job or occupation and loss of employment.
d) Death of an Employee
SAMPLE QUESTIONS
1. Outline the statutory frame work of employment law in Kenya.
2. Differentiate between a contract for service and a contract of service.
3. Discuss various ways in which a contract of employment can be
brought to an end.
AGENCY
General objective
By the end of the lesson the learner should be able to explain the application of the law of agency in
business
Specific objectives
a) Explain the various classes of agents
b) Explain the various ways in which agents are created
c) Explain the rights and duties of agents and principals
d) Explain circumstances in which agencies are terminated
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
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
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 AGENT
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.
(iii) The goods fall outside the technical definition of "necessaries" and are legally regarded
as luxuries.
DUTIES BETWEEN PRINCIPAL AND AGENT
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
(d) 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
SAMPLE QUESTIONS
1. How is a contract of agency formed?
2. What are the duties of an agent and a principal in agency
3. Discuss ways in which a contract of agency can be brought to an end.
SAMPLE QUESTION PAPER
1. The paper consists of two parts: A and B

2. Section A contains one question which is compulsory.
3. Choose any other two questions from Section B.
SECTION A
1. a) Discuss any three sources of law in Kenya ( 9 marks)
b) Explore the applicability of the African customary law as a source of law in Kenya as spelt out
under The Judicature Act.
(12 marks)
c) Write short notes on the following torts:
i) Trespass to land
ii) The rule in Rylands v. Fletcher
iii) Trespass to goods (9 marks)
SECTION B
2. Discus both the duties of an agent and a principal in a contract of agency. (20 marks)
3. Explore the following ingredients of a valid contract:
a) Capacity ( 10 marks)
b) Consideration (10 marks)
4. a) Discuss ways through which an agency relationship can be brought to an end `(12 marks)
b)Explore the concept of the discharge of a contract (8 marks)
5. a) Highlight the implied terms to a sale of goods contract under the sale of goods act. (12
marks)
b)Explore the remedies of an unpaid seller under the sale of goods law. (8 marks)

DBM 1311 Business Law

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SCHOOL OF BUSINESS AND PUBLIC MANAGEMENT

DBM 111: BUSINESS LAW

Joseph Ogola, Business law, Focus Publications, 1999

Ahmad Saleemi, General Principles of Law Simplified, Saleemi Publications Limited,2007

C.R. Newton, General Principles of law, 1991

C. Hamblin and F. Wright, Introduction to commercial law

Gordon , Commercial law

BUSINESS LAW COURSE OUTLINE

1. The Kenyan legal system

3. The law of torts

4. The law of contract

Nature and definition

7. The law of agency

1. Nature and sources of law

By the end of the lesson the learner should be able to:

b) Explain the classification of law

c) Differentiate between criminal wrongs and civil wrongs

d) List down the sources of law in Kenya

e) Explain the court system in Kenya.

6. African Customary Law

Hierarchy of the Court System in Kenya

1. List and explain the various sources of Kenya Law.

2. Explain the importance of the following:

(a) Law in the society

TOPIC 2: THE CONCEPT OF LEGAL PERSONALITY

a) Differentiate between natural persons and legal persons

b) Explain the various ways in which corporations are created.

d) Explain the various types of unincorporated` associations

a) Explain the functions of the law of torts

b) Explain the general defences applicable in the law of torts

NATURE AND DEFINITION OF TORTS

AIMS OF THE LAW OF TORTS

Persons of Unsound Mind:

Liability for Independent Contractors:

The Rule in Rylands v. Fletcher, (1866)

Limits of the Rule:

(i) Non-Natural User:

(ii) Need for Escape:

(iii) Natural User of Land:

Defences in Rule in Rylands v. Fletcher:

(a) Plaintiff’s Fault:

(b) Act of God

(c) Act of Stranger

Trespass by Wrongful Entry

Trespass by placing things on land:

Kelsen v. Imperial Tobacco Co. Ltd, (1957)

(v) Distress Damage Feasant

Trespass to the Person

(ii) Habeas Corpus:

Trespass to Goods, Conversion and Detinue

The Duty of Care:

Breach of the duty:

Bourhill v. Young, (1943)

Function of the Law of Defamation

Where the statement imputes unchastity on a woman.

(c) Absolute Privilege:

(d) Qualified Privilege:

a) Explain the essentials of a valid contract

b) Explain how contracts are formed