1: Explain terms related law

Definition of term Law

Law is a system of rules, principles and regulations which a certain country or
community recognizes as regulating the actions of the members and which it
may enforce by the imposition of penalties. For example, the Penal Code of
Tanzania provides for the punishment of theft. The rule behind this is that you
shall not steal, it is prohibited to steal. Once you steal you are punished.

Elements of the law

System of Rules

As system law in not a single item but it comprises of the set of rules. The body is
made up of rules with contents which permit, prohibit, or direct human behaviours.

Human Conduct

Law is for the guidance of human conduct. Without law there can be no orderly social
interaction, no social order of whatever kind, but everybody could do what he likes.

Imposed Upon

Law is made (enacted) by a sovereign law making organ of the State namely the
Parliament and imposed on the citizens.

Enforced among the Members

The law must be enforced among its members. Enforcement is the chief characteristics
of law. Enforceability of the law is what makes the law binding. The members of the
society must be bound to behave in accordance with the law.

Breach of the same attract sanction

Penalty is imposed to the people in breach of that law

A Given State
Law does not exist in a vacuum. There must be a territorial division (community,
society, division, province, country, etc) in which people live subject to a uniform
system of law administered by a sovereign authority of the State.

2 Sources of Law

Tanzania’s legal system is based on the English Common Law system. It

derived this system froA source of law is any threshold where one can refer to or rely
upon in order to claim, to perform or enforce his duty or rights. There are several
sources of laws.

Constitution.

The Constitution of the United Republic of Tanzania of 1977 as amended from

time to time, provides for the composition of administrative authorities of
Tanzania as a country.

It identifies the pillars (arms, powers) of the government that is the executive,
legislature and judiciary. Then the constitution vests administrative powers to
each administrator according to the duties and responsibilities given.

Statute or Legislation

These are laws enacted by the parliament or by other law making organ
delegated by the parliament.

 Statutory laws (principal legislation).

 Subsidiary legislation

Case Laws

These are the decisions of superior court. Case laws are sometimes known as
precedent. They can also be referred by the courts which made them.

Received Law
These are laws which were imposed by the British when they colonised
Tanganyika. English laws were received in the territory of Tanganyika by virtue
of the “reception clause” in the Tanganyika Order-in-Council of 1920.

This Order acted as a conduit for the general reception into Tanganyika of the
common law, the doctrine of equity and statutes of general application.

Common Law. These are laws which were commonly used in England. Created
by the customs of the people and decisions of the judges in England.

Equity. These are rules which were developed by the Old court of Chancery.
They were purposely made to supplement or cure the mischiefs of the common
law.

Statutes of General Application.

Consent of the parliament must be sought.

Pre-existing Laws

These are laws which were existing in the territory before colonialism.

 Customary Law. It became the source of law with the same status as
any other source of law in Tanzania.
 Islamic Law. Is applicable in matters relating to marriage, succession,
inheritance, probate and waqf.

NB conflict between state law and Islamic law?

International Law (Instruments and Conventions)

These are laws made by UN organs and intended to be used by all countries
which are members of UN. Normally a country’s parliament must consent the
use of the law.

These are promulgated by countries in order to have harmony in administrative

matters. It can involve regional like EAC, ECOWAS, SADC, etc.
Terms related to law
Law with reference to the State is defined as, “a system of rules of human
conduct, imposed upon and enforced among the members of a given State.”

From the definition given certain key important concepts should be noted

Function of Law

 To determine activities which conform to be considered as lawful

 To maintain the relations among individuals in the community

 To establish the rules that define a person’s rights and duties

 To set penalties for people who violate established rules

 To state how rules, penalties shall be enforce

 To establish the position of the people in the state

 To demonstrate the relationship between citizens and the government

(Administrators)

Norms
Informal guideline about what is considered normal (what is correct or
incorrect) social behavior in a particular group or social unit. Norms form the
basis of collective expectations that members of a community have from each
other, and play a key part in social control and social order by exerting a
pressure on the individual to conform. In short, "The way we do things around
here."

OR

Formal rule or standard laid down by legal, religious, or social authority

against which appropriateness (what is right or wrong) of an individual's
behavior is judged.
Morality
Is the differentiation of intentions, decisions and actions between those that are
distinguished as proper and those that are improper.

Morality can be a body of standards or principles derived from a code of conduct

from a particular philosophy, religion or culture, or it can derive from a standard
that a person believes should be universal.

Morality may also be specifically synonymous with "goodness" or "rightness"

Customs
These are rules based on experience of what is right or useful in a society.
Customs develop when certain socio-economic, political, and cultural condition
prevail for a long time and are reproduced on the same level

Legal rules simply state that if we behave in a certain way we will suffer
sanction. “Thou shall not kill” is a moral or religious rule. “If thou kills, thou
shall be hanged” is a legal rule. In a legal rule, the punishment is explicitly on
the face of the rule.

Proclamation
Is an official declaration issued by a person of authority to make certain
announcements known. Proclamations are currently used within the governing
framework of some nations and are usually issued in the name of the head of
state.

Legislations
These are laws enacted by the parliament or by other law making organ
delegated by the parliament.

 Statutory laws (principal legislation).

 Subsidiary legislation
Act
Law that has been officially accepted by a parliament. Before a law becomes an
‘Act’, when it is still being discussed, it is called a ‘bill’

Policies
Is a law, regulation, procedure, administrative action, incentive, or voluntary
practice of governments and other institutions. Policy decisions are frequently
reflected in resource allocations. Health can be influenced by policies in many
different sectors.

For example, transportation policies can encourage physical activity

(pedestrian- and bicycle-friendly community design); policies in schools can
improve nutritional content of school meals.

State
The state is an organ of class rule, an organ for the oppression of class by
another. It came into being when society split up into classes. It developed as
the political organization of the economically dominant class which became by
the means of the state, the political dominant class.

2: Branches of law

Explain the meaning of branches of law

Substantive

Is the set of laws that governs how members of a society are to behave. It is
contrasted with procedural law, which is the set of procedures for making,
administering, and enforcing substantive law.

Substantive law defines rights and responsibilities in civil law, and crimes and
punishments in criminal law.[1] It may be codified in statutes or exist through
precedent in common law

Procedural
Comprises the rules by which a court hears and determines what happens in
civil, lawsuit, criminal or administrative proceedings.

The rules are designed to ensure a fair and consistent application of due
process or fundamental justice to all cases that come before a court.

Civil laws

The object of civil law is the redress of wrongs by compelling compensation or

restitution: the wrongdoer is not punished; he only suffers so much harm as is
necessary to make good the wrong he has done. The person who has suffered
gets a definite benefit from the law, or at least he avoids a loss.

Criminal laws

In the case of crimes, the main object of the law is to punish the wrongdoer; to
give him and others a strong inducement not to commit same or similar
crimes, to reform him if possible and perhaps to satisfy the public sense that
wrongdoing ought to meet with retribution.

Private laws

Is the law which governs relationships between private individuals, for

example, law of contract, tort law, property law, succession (and trust) law, and
etc. Private laws usually do not involve the government, and are laws that allow
one private entity to sue another private entity in a civil lawsuit.

Public laws

Is the law which deals with the relationship between the state and individuals,
the distribution and exercise of public powers.

Braches of public law are Constitution law, Administrative law, Regulatory law
(e.g. EWURA & TCRA laws), and Criminal law (e.g. Penal Code).

Domestic laws
Is the national, municipal law, or internal law of a sovereign state defined in
opposition to international law. Municipal law includes many levels of law: not
only national law but also state, provincial, territorial, regional, or local law

International laws

Is the set of rules generally regarded and accepted as binding in relations

between states and between nations.

It serves as a framework for the practice of stable and organized international

relations.

International law differs from state-based legal systems in that it is primarily

applicable to countries rather than to private citizens. National law may
become international law when treaties delegate national jurisdiction to
supranational tribunals such as the European Court of Human Rights or the
International Criminal Court. Treaties such as the Geneva Conventions may
require national law to conform to respective parts.

Much of international law is consent-based governance. This means that a

state member is not obliged to abide by this type of international law, unless it
has expressly consented to a particular course of conduct. This is an issue of
state sovereignty. However, other aspects of international law are not consent-
based but still are obligatory upon state and non-state actors such as
customary international law and peremptory norms

Tort

Is a civil wrong which is redressable by an action for unliquidated damages and

which is other than a mere breach of contract. In tort the duties are primarily
fixed by law.

Contract
Can be defined as an agreement giving rise to obligations which are enforced
and recognized by law. In contract, the duties are fixed by the consent of the
parties.

Explain the differences between the branches of law

3: Explain the relevance of law to business

Relevancy of law to business

The essence of law in business cannot be underestimated. Before any business can
be establish one must adhere to business requirement. Noncompliance to the
requirement renders to criminality of the business. As the subject, business law,
therefore, aims at equipping students with the knowledge on the basic sources of laws
that regulate commercial transactions that one should be involved in.

4. Explain the Court System and Tribunals

Meaning of court
A court is an entity in the government to which the administration of justice is
delegated. Judicial courts are created by the government through the
enactment of statutes or by constitutional provisions for the purpose of
enforcing the law for the public good. They are impartial forums for the
resolution of controversies between parties who seek redress from a violation of
a legal right.

There are many ways to resolve disputes, and they don’t all involve a trial
before a judge in court. Administrative tribunals run parallel to the court
system. Although administrative tribunals may resemble courts because they
make decisions about disputes, they are not part of the court system .

There are two significant differences between administrative tribunals and

courts:
 1. Administrative tribunals are set up to be less formal, less expensive, and
a faster way to resolve disputes than by using the traditional court
system.

2. Tribunal members who make decisions (adjudicators) usually have

special knowledge about the topic they are asked to consider. Judges,
however, are expected to have general knowledge about many areas of
law, not particular expertise about the law in the case they are hearing.

5. Hierarchy of the Court in United Republic of Tanzania

Court of Appeal

The Court of Appeal of Tanzania, established under Article 108 of the

Constitution, is the highest Court in the hierarchy of judiciary in Tanzania. It
consists of the Chief Justice and other Justices of Appeal. The Court of Appeal
of Tanzania is the court of final appeal at the apex of the judiciary in Tanzania.

The High Court of Tanzania (for mainland Tanzania) and the High Court of
Zanzibar are courts of unlimited original jurisdiction, and appeals there from
go to the Court of Appeal.

The High Court

The High Court’s Main Registry, (which includes the sub-Registries) caters for
all civil and criminal matters. The High Court (mainland Tanzania) has
established 10 sub Registries in different zones of the country. It also has three
specialized divisions, the Commercial Division, Labour Division and the Land
Division. All appeals from subordinate courts go to the High Court of Tanzania.

The Resident Magistrates’ Courts and the District Courts

The Resident Magistrates’ Courts and the District Courts are established under
Section 4 and 5 of the Magistrates’ Courts Act, Cap 11 R.E. 2002.
They enjoy concurrent jurisdiction whereas the Magistrate Courts are found at
the Regional level while the District Courts are found throughout the district of
Tanzania.

These Courts have original jurisdiction in matters which the Primary courts
lack jurisdiction. They also have appellate, supervisory and provisional powers
over decisions or proceedings of the Primary Courts.

The Primary Courts

The Primary Courts are established by S. 3 of the Magistrates’ Courts Act.

They are the lowest courts in the hierarchy of the Tanzania court system and
do exercise jurisdiction within their respective Districts where are established.

The Primary Courts have original jurisdiction in all proceedings of a civil nature
where the law applicable is customary law and Islamic law. They also have
jurisdiction in matrimonial proceedings relating to civil and Christian
marriages or any other proceedings in respect of which jurisdiction is conferred
on a primary court by the Magistrates’ Court Act or any other law.

The Primary Court Magistrate sits with lay assessors (normally lay persons) to
hear cases in minor civil and criminal offences

6. Describe the Constitution

Constitution
A constitution is a legal and fundamental document that encompasses the
principles and rules governing the relationship of individuals and the state in
its day to day functions.
From the definition we see that the constitution lies down the following:

(1) Organisation and powers of the government;

(2) Principles and rules governing the political process;

(3) Relations between the people and their government; and

(4) Rights and duties of the people.

Identify the types of constitution

Constitution has been categorized into the following classifications due to their
compositions and organizations:-

Presidential and Parliamentary Constitution

Presidential constitution is where we find three organs of the state are
sharply and clearly separated by the doctrine of separation of power, and thus
each organ especially the executive and legislature is separately chosen and
removed from office.
Parliamentary constitution/West-Minister Model, here the executive is
chosen and removed by the legislature and that the chief executive (Prime
Minister) is also member of the Parliament and that ministers are drawn or
appointed from the National Assembly and therefore they are collectively
responsible to the National Assembly. Here also the head of the state is not the
head of the government.

Written and Unwritten Constitution

Written constitution is that in which the principles are enshrined in one
single document.
Unwritten constitution is that in which the principles thereto constitute or
contain various documents, also the principles can be found in practice.
Example the Great Britain (UK)

Rigid and Flexible Constitution

Rigid constitution is that in which the process of amending its provision or
provisions is difficulty, example by requiring 2/3 majority vote or requiring
referendum.
Flexible constitution is that in the process of amending of its provision or
provisions is not difficulty, example by requiring simple majority vote.
Federal and Unitary Constitution
Unitary constitution, here the state is organized as a single unified unit
where the central ultimate power is hold by the central government.
Federal constitution, under federal system the powers of the government are
divided between the central government and different geographical units
(states, provinces, etc).

Republican and Monarch/Aristocracy Constitution

Republican constitution, under republican system all people deserve equal
right and respect to form the government, therefore sovereignty rise from the
people who have right to choose their leaders.
Monarch constitution, monarchial recognizes the rules by one person that is
king or queen, and this post is hereditary. This practiced in Britain, Malaysia,
Swaziland and Scandinavia.
The advantages of the Constitution
In fact constitution has got number of advantages or merits, some of them are
elaborated hereinafter;
 Constitution sets out the principles and values upon which the state or
nation is organized and governed
 It provides for the ideals and aspirations for the people of the nation or state
 It establishes the three organs of the state ( the executive, Legislature or
Parliament and Judiciary) and defines their powers and functions as well as
controls or limitations ( mechanisms) for their function
 It establishes checks and balances within the three organs of the state or
relationship between the three organs of the state
 It establishes a government which is based on the rule of law and is limited
by law
 It safeguards the basic rights and freedoms of the citizens
 It acts as a power-map by providing the direction, frame-work etc.
Describe the elements of constitution
7. Pillars of the state

Pillars of State
It is generally recognised that governmental power is exercised by three
branches of government, namely: the executive; the legislature; and the
judiciary.

THE EXECUTIVE
It is important to bear in mind that the Constitution of Tanzania makes
provision for two executives under Art 4 CURT: the Executive of the United
Republic (Chapter 2) and the Executive of the Revolutionary Government of
Zanzibar (Chapter Four). For the purposes of this chapter, only the Executive
of the United Republic of Tanzania is discussed as focus here is on mainland
Tanzania.
Article 35(1) specifies that all executive functions of the government of the
United Republic discharged by officers of the government are done on behalf of
the president. Also, article 34(3) provides that subject to the Constitution:
all the authority of the Government of the United Republic over all Union
Matters [a list of 22 of these is set out in the First Schedule to the
Constitution and they include constitutional matters, foreign affairs,
defense and security] in the United Republic and also over all other
matters concerning mainland Tanzania shall vest in the President.

Clearly then, executive authority vests in the president.

It is important to note, however, that Tanzania also has a prime minister who,
in terms of article 52(1), has authority over the control, supervision and
execution over the day to day functions and affairs of the government of the
United Republic; but he does so under the direction of the president, in terms
of article 52(3).
The Cabinet of Tanzania is made up of the president, the vice-president, the
prime minister and ministers appointed by the president – see article 54. Note
that Article 54(3) provides that Cabinet is the principal organ for advising the
president regarding all matters concerning the exercise of his powers.
Essentially, the role of the executive is to administer or enforce laws, to make
governmental policy and to propose new laws.

THE LEGISLATURE
Legislative power in relation to all Union Matters (a list of 22 of these is set out
in the First Schedule to the Constitution and they include: constitutional
matters foreign affairs, defense and security) and also in relation to all other
matters concerning mainland Tanzania vests in Parliament, in terms of Article
64(1) of the Tanzania Constitution.
In terms of article 62(1), the Parliament of the United Republic consists of the
president and the National Assembly. Importantly, key functions of the
National Assembly include:
 Asking ‘any question to any Minister concerning public affairs in the
United Republic which are within his responsibility’ – Article 63(3)(a)
 Debating ‘the performance of each Ministry during the annual budget
session of the National Assembly’ – Article 63(3)(b)
 Enacting law ‘where implementation requires legislation’ Art. 63(3)(d). In
terms of Article 66(1), the National Assembly shall consist of the
following categories of members:
 Members elected to represent constituencies, which constituencies are
determined by the Electoral Commission.
 Women members proposed by political parties on the basis of
proportional representation, making up at least 30% of the members of
the National Assembly.
 Five members elected by the House of Representatives of Zanzibar from
among its members.
  The attorney-general.
 Up to ten members appointed by the president, at least five of whom
shall be women.
 The speaker, if not elected from among the members.

THE JUDICIARY
Judicial power, vests in the courts. The role of the judiciary is to interpret the
law and to adjudicate legal disputes in accordance with the law. In terms of
article 107A (1) of the Tanzania Constitution, the judiciary is the ‘authority
with final decision in dispensation of justice in the United Republic of
Tanzania’. Judicial authority of the Republic vests in the courts, which are
required to observe the following principles, in terms of article 107A (2):
(a) Impartiality to all without due regard to one’s social or economic
status;
(b) Not to delay dispensation of justice without reasonable grounds;
(c) To award reasonable compensation to victims of wrong doings
committed by other persons, in accordance with laws enacted by
Parliament;
(d) To promote and enhance dispute resolution among persons involved
in the disputes;
e) To dispense justice without being tied up with technicalities which
may obstruct the dispensation of justice

8. Describe the separation of powers

Separation of powers
The principle of separation of powers, is the cornerstone of any democratic
system.
Separation of powers, therefore, refers to the division of government
responsibilities into distinct branches to limit any one branch from exercising
the core functions of another.

A 17th century French philosopher Montesquieu (1689-1755) is credited to have

first propounded this principle. He argued that separation of power between
different organs of the State helps to deter abuse of power and the three organs
mutually act as checks on each other thereby balancing it. This is the theory of
checks and balances.

Wade, propounded for three things:-

(a) That the same persons should not form part of more than one of the three
organs of the government, e.g. that ministers should not sit in parliament

(b) That one organ of the government should not control or interfere with the
exercise of its function by another organ, e.g. that ministers should not be
responsible to parliament

(c) That one organ of the government should not exercise the functions of
another e.g. that ministers should not have legislative powers.

Checks and Balance

A absolute separation of powers can paralyze the operation of the state thus
checks and balance was employed to cure the same.

 How executive checks parliament – Art 97 Bill, dissolution of parliament.

 How executive checks judiciary -Art 109(8) appointment of J, Prerogative

of mercy Art 45.

 How parliament checks Executive –Art 46A Impeachment, Pausing

question condoct of ministry Art 63(3)(d), vote of no confidence Art.53A.

 How parliament checks judiciary –Legislating Art 97

  How judiciary checks executive – Judicial review S.95 CPC and Chapter
5 CURT.

 How judiciary checks parliament – Declare the laws unconstitutional Art

64(5)

Importance of the doctrine of separation of powers in Tanzania.

 It aims at individual liberty.
 It is a safeguard against despotism.
 Its basic principle that concentration of powers leads to dictatorship is
true for all time and ages.
 The separation of powers saves the people from the arbitrary rule of the
executive.
 This theory lays down the principle that governments should act
according to certain well established rules or law.
 Each organ acts as a check upon the others.

It is desirable for maintaining the efficiency in the administration.

9. Describe the rule of law

Rule of law
This means that the exercise of political power is in accordance with rules and laws
and power is to be exercised within these rules and laws and not according to personal
desires of the ruler. Every individual or institution which exercises authority or public
power has to justify it by reference to law.

Rule of law contains three principles:-

i) Supremacy of Law:

'No man is punishable or can lawfully be made to suffer in body or goods except for a
distinct breach of law.

No man can be punished except for a breach of law.

Proof = ordinary courts

Proof =ordinary procedure.

ii) Equality before Law:-

The second meaning of the Rule of Law is that no man is above law. Every man
whatever be his rank or condition is subject to the ordinary law of the realm and
amenable to the jurisdiction of the ordinary tribunals.

Prof. Dicey states that, there must be equality before the law or equal subjection of all
classes to the ordinary law of the land. He criticized the French legal system of droit
Administrative in which there were separate administrative tribunals for deciding the
cases of State Officials and citizens separately.

iii) Predominance of Legal Spirit: -

General principles of the constitution should be the result of juridical decisions

determining rights of private persons in particular cases brought before the court.

Documentary guarantee of such rights is not enough (Bills of Rights). Such rights can
be made available to the citizens only when they are properly enforceable in the courts
of law.

For Instance, in England there is no written constitution and such rights are the
result judicial decision.

10. Sub-enabling outcome

Law of Contract
A Contract is a legally enforceable agreement between two or more parties
which gives rise to obligations for the parties involved. For example the
promises to deliver a car to B and B promises to pay upon delivery of the car.
Their agreement to perform these undertakings is known as a contract.

Contract
Contract is an official agreement. It could be written or even be in oral. Contracts can
be written by using formal or informal terms, or entirely verbal or spoken. It is a
promise made between two or more parties that which allow the courts to make
judgment.

A contract has six important elements so that it will be valid which is offer,
acceptance, consideration, intention to create legal relation and capacity. If the main
elements are not in contract, it would be an invalid contract.

Elements of contracts
Offer

Can be refereed to mean promise or an agreement needs to be in a contract, To make

an offer, there should be at least two parties or even more so that it would be legally
capable of entering into a contract. When an offer is being made, the other party or
person would know what is being offer and what the person or party who made the
offer expect to have in return

Acceptance

After having an offer in the contract, there should be acceptance from the other party
or person. When the other party is clear with the offer, there would make an
acceptance once they are clear with the rules and regulations being offer in the
contract. No contract if the parties are still negotiating or discussing and have not
made accept the offer.

Consideration

Consideration is anything which value on the eyes of the law. In a contract would
mean the other person would be giving back something in return. It would be consider
as an exchange which would be made between the promisee and promissor.
Consideration can even be trivial or just love and affection.

Intention to Create Legal Relations

This element would have an agreement which is not a contract in the strict sense
unless it is the common intention of the parties that it should be legally enforceable. If
there is no intention to create legal relations in a contract, the contract could be
subject to a lawsuit

Capacity
Capacity in a contract is the parties to the contract must have the legal capacity to do
so. 18 years old is stated as the age of a major. Therefore, insane people or people with
unsound minds also cannot enter into any valid contracts.

Thus,

It is important to have the main elements in a contract. Only if there are all the main
elements in a contract then it would be legally valid to make a contract. People should
take precaution in making a contract to make sure that the parties would be in
agreement with the terms made in a contract.

11. Describe Terms of contract

Terms of contract

A contractual term is "Any provision forming part of a contract". Each term

gives rise to a contractual obligation, breach of which can give rise to litigation.
Not all terms are stated expressly and some terms carry less legal gravity as
they are peripheral to the objectives of the contract

Explain the terms of contract

Condition or Warranty
Conditions are terms that go to the very root of a contract. Breach of a
condition will entitle the innocent party to terminate the contract. A warranty
is less imperative than a condition, so the contract will survive a breach.
Breach of either a condition or a warranty will give rise to damages.

It is an objective matter of fact whether a term goes to the root of a contract.

By way of illustration, Alikiba Plutnumz obligation to perform the opening

night of a theatrical production is a condition, whereas a Alikiba Plutnumz
obligation to perform during the first three days of rehearsal is a warranty.
Express and Implied terms
A term may either be expressed or implied.

An express term is stated by the parties during negotiation or written in a

contractual document. Implied terms are not stated but nevertheless form a
provision of the contract.

Terms implied in fact

The Privy Council established a five-stage test in BP Refinery (Westernport)
Pty Ltd v Shire of Hastings

Reasonableness and equitableness

The implied term must be reasonable and equitable. In Biotechnology Australia

Pty Ltd v Pace,[16] it was held a term that imposes a significant detriment or
burden on the other party is unlikely to be equitable.

Business efficacy

The implied term must be necessary for the business efficacy of the contract.
For instance, if the term simply causes the contract to operate better. If one
could proppose a term and both the parties would be likely to reply with a testy
"oh, of course", the term is implied.

Obviousness

The term is so obvious that it goes without saying. Furthermore, there must be
one and only one thing that would be implied by the parties.

Clear expression.

The term must be capable of clear expression. No specific technical knowledge

should be required.

Consistency.

The implied term may not contradict an express term.

Terms implied in law

These are terms that have been implied into standardized relationships.

For example land law established a term to be implied into all contracts
between tenant and landlord that the landlord is obliged to keep the home in
good condition for human habitat and in a reasonable state of repair.

The rules by which many contracts are governed are provided in specialized
statutes that deal with particular subjects. Most countries, for example, have
statutes which deal directly with sale of goods, lease transactions, and trade
practices.

Terms implied by custom or trade

One is generally bound by the custom of the industry that one is in. To imply a
term due to custom or trade, one must prove the existence of the custom,
which must be notorious, certain, legal and reasonable.

Course of dealing

If two parties have regularly conducted business on certain terms, the terms
may be assumed to be same for each contract made, if not expressly agreed to
the contrary. The parties must have dealt on numerous occasions and been
aware of the term purported to be implied

Good faith

It is common for lengthy negotiations to be written into a heads of agreement

document that includes a clause to the effect that the rest of the agreement is
to be negotiated. Although these cases may appear to fall into the category of
agreement to agree, Australian courts will imply an obligation to negotiate in
good faith provided that certain conditions are satisfied.

12. Explain Discharge of a contract

Discharge of a contract (coming to an end)

A contract can be discharged in principally five ways;

Discharge by performance
Contract is discharged by performance when both parties comply fully with the
terms of the contract. If both parties perform their obligations under the
contract then it is said that a contract has been performed. When a contract is
discharged by performance no legal problems arise. It should be noted that half
performance does not amount to performance
Discharge by agreement
The parties can agree to abandon the contract. However a discharge by
agreement must be supported by consideration.
Discharge by operation of law
Contract can come to an end on operation of the law. For example a contract
that is frustrated by the virtual of operation of the law. Frustration is an
unforeseen act which occurs after the contract has been concluded and makes
the performance of the contract impossible. Therefore such contracts are
brought to an end automatically by the operation of a rule of law
Discharge by breach
Breach of a contract occurs when one party without lawful excuse fails or
refuses to perform what is due from him under the contract or performs poorly.
It is important to note that such a breach must be without lawful excuse.
When a breach occurs various options are available to the other party who is
not in breach (the innocent party). The innocent party is entitled to recover the
damages in respect of the loss which he has suffered
Discharge by frustration
Contract may be automatically discharged under the doctrine of frustration if
during the performance of the contract and without the fault of either party
some event occurs which renders further performance impossible or illegal.
Taylor v. Caldwell (1863)
Illegality may occur due to a change in the law which will render further
performance impossible.
However self-induced frustration is a breach of a contract and the party at fault
will be liable for breach of contract. Here the contract cannot be discharged by
frustration. A contract cannot be discharged by frustration if the event that
caused frustration was foreseen.

13. Describe Remedies for breach of contract

Remedies for breach of contract

Are those entitlements or reliefs given to the innocent part of the contract so as
to bring him back to the financial position in which he was before the contract

Remedies for Breach of Contract

Whenever contract is breached by one of the Party in a contract, the other

party comes across some suffering. Therefore, contract act has given certain
rights to such suffering party. Those rights are called remedies for breach of
contract. Those are given below:

Different types of Damages

Damages in legal terms called Compensation. Whenever one of the party in the
Contract comes across breach of Contract, the other party rights to sue for
damages.

1. General Damages

2. Specific Damages

3. Nominal Damages

4. Vindictive/Punitive Damages

5. Liquidated Damages

Specific Performance
At times the suffering party may file a suit claiming specific performance form
the party which has breached the contract. But this type of suit very rarely
becomes successful. The following are some circumstances where suit for
specific performance will not be taken into consideration.

 Example 1: When performance depends upon personal talent and the

party has list Such talent.

 Example 2: When court thinks that it is just and equitable to arrange for
compensation.

Injunction Order

The order issued by court restrict in a person from doing a particular thing is
called injunction order. Upon breach of contract the suffering party may
proceed legally for injunction order.

 A case on this point is Barner Bros Vs Nelson. In this case a contract

gets formed between A and B according to which B has to conduct his
dance programs at A`s theater only for certain period. But B breaches
the contract and arranges his programs at other theaters also before
expiry of agreed period. A`s sues for injunction order. Then court issues
injunction order saying that B should not conduct his programs at other
theaters before expiry of agreed period.

Quantum Meruit

Whenever a party performs the contract partially and then the other party
breaches the contract, Suit can be filed claiming proportionate remuneration. It
is called suit for quantum meruit.

 A case on this point is Flanch Vs Karlbarn. In this case A is editor of a

magazine and B is a writer. According to their contract B has to supply
story to A`s magazine for certain number of weeks for a particular
consideration. B supplies story for some weeks and there after A closes
 down his magazine. B sue`s for proportionate remuneration and it is
allowed by court.

Recession of Parties

At times, the suffering party may sue for recession for contract.

 Example: A contract has got formed between A and B on 1st January.

According to their contract A has to supply 100 pairs of readymade
dresses to B, on 1st April on 28th March strike by transport companies
is announced which will be called off on 3rd April. It should be noted
that A cannot supply on 1st April. But B is in need of those dresses only
on 1st April. Hence B can sue for recession on contract.

14. Explain the process of Creation of an agency

Identify the process of creation of an Agency

Creation of Agency

A person who has capacity to contract can enter into contract either by himself
or though some other person. If he adopts the first method there is no question
of agency. If he adopts the second method, then there is agency. The person
who represents another in his dealing with third parties is called agent and
that person who is so represented by agent is called principal.

The following are different modes of creation of agency.

Agency by Express agreement
Number of agency contract come into force under this method. It may be Oral
or documentary or through power of attorney.

Agency by operation of law

At times contract of agency comes into operation by virtue of law.
For example: According to Law of Contract Act under S. 201, Stipulates that
every partner is agent of the firm as well as other parties. It is implied agency.
On account of such implied agency only a partner can bind over firm as well as
other partners, to his activities. In the same way according to companies act
promoters are regarded as agents to the company.

Agency by Ratification
Ratification means subsequent adoption of an activity. Soon after ratification
principal – agent relations will come into operation. The person who has done
the activity will become agent and the person who has given ratification will
become principal.

Ratification can be express or implied. In case where adoption of activity is

made by means of expression, it is called express ratification. For example:
Without A`s direction, B has purchased goods for the sake of A. There after A
has given his support (adoption) to B`s activity, it is called Ratification. Now A
is Principal and B is agent.

The ratification where there is no expression is called implied ratification. For

example: Mr. Q has P`s money with him. Without P`s direction Q has lent that
money to R. There after R has paid interest directly to P. Without any debate P
has taken that amount from R. It implies that P has given his support to Q`s
activity. It is implied ratification.

Agency by implied authority

This type of agency comes into force by virtue of relationship between parties
or by conduct of parties.

For example: A and B are brothers, A has got settled in foreign country without
any request from A, B has handed over A`s agricultural land on these basis to
a farmer and B is collecting and remitting the amount of rent to A. Here
automatically A becomes principal and B becomes his agent.

Agency by implied authority is of three types;

i. By Necessity
At times it may become necessary to a person to act as agent to the other. For
example: A has handed over 100 quintals of butter for transportation, to a road
transport company. Actually it is bailment contract, assume that in the transit
all vehicles has got stopped where it takes one week for further movement. So
the transport company authorities have sold away the butter in those nearby
villages. Here agency by necessity can be seen.
ii. By Estoppel
In presence of A , B says to C that he (B) is A`s agent though it is not so
actually. A has not restricted B from making such statement. Here agency by
Estoppel can be seen
iii. By Holding out:
B is A`s servant and A has made B accustomed to bring good on credit from
C. On one occasion A has given amount to B to bring goods from C on cash
basis. B has misappropriated that amount and has brought goods on credit
as usually, Here is agency by holding out and therefore A is liable to pay
amount to C

15. Describe the ratification of agency

Ratification of Agency
Agency by Ratification

Subsequent adoption of an activity is called ratification. Soon after ratification,

the person who has done the activity becomes agent and that person who has
given ratification becomes principal.

Ratification is of two types. Namely;

  Express Ratification and

 Implied Ratification.

The ratification where there is wording and expression is called express

ratification. For example: Without A`s direction, B has purchased goods for the
sake of A from C. Thereafter, A has given his Support to B`s activity, it is called
ratification and now A is principal and b is agent.

The ratification where there is no expression is called implied ratification. Here

the mode of behavior of the party indicates that support is given to activity
concern. For example: Mr. Q has P`s money with him. Without P`s direction Q
has lent that amount to R. Thereafter, R pays interest directly to P and P has
taken the amount of interest. It indicates that P has given his support to Q`s
activity.

Essentials of Valid Ratification:

1. The person, who is going to give ratification, must be in existence at the
time of activity.

2. The person who is going to give ratification should have capacity to

contract, at the time of activity as well as at the time of ratification

3. Ratification should be given within reasonable period after the activity

the concept of reasonable period depends upon nature of the situation.

4. Ratification must be absolute. To entire activity ratification is to be given.

Partial ratification carries no validity.

5. The fact of ratification must be communicated to all parties in connection

with the activity.

6. Ratification attains validity only when it is given with full knowledge of

facts relating to the activity.
 7. The activity which is going to be ratified must be a lawful activity..

8. The person who is going to give ratification should have right to do such
activities. For example: If company gives ratification to an Ultravires
activity it is not valid.

9. Ratification should not lead to breach of contract. In other words

ratification should not be harmful to third party. For example: There is a
rental agreement between A and B according to which three months
notice is needed at the time of vacation of house. On one day C, A`s son,
has asked B to vacate the house on that day itself. A has given his
support to C`s activity. It is not valid ratification because it leads to
breach of rental agreement and at the same time it is harmful to B.

16. Explain the Agent’s authority

Agent’s authority
To contract

Act on the behalf of the principal

His act bind the firm

17: Describe the rights of agent

Rights of Agents.

1. Right of Retainer: Agent has right to deduct the amount which is due to
him by principal, from amount payable to principal.

2. Right of stoppage in transit: In case where agent is personally liable,

he has right to stop the goods in transit. The good may be moving
towards customer or principal.
 3. Right to claim Remuneration: As per the terms of agency contract,
agent has rights to claim remuneration.

4. Right of Indemnity: Principle of indemnity gets operated between

principal and agent where principal is implied indemnifier and agent is
implied indemnity holder. So agent can make principal answerable for all
types of sufferings.

5. Right of lien: Agent can exercise right of lien but contract act has not
specified whether it is general lien or particular lien. Therefore the nature
of agent’s lien depends upon mutual understanding.

18. Describe the ethical principles and Duties of agent

Duties of Agents
1. Agent should follow the instructions given by the principal.

2. If agent comes across any complicated situation, he has to communicate

that situation to principal and his advice is to be obtained.

3. Agent should behave in his capacity as agent, he should not run the
transaction in his own name.

4. Agent should not make secret profits by utilizing reputation of the

principal.

5. Agent should safe guard property of principal particularly upon

happening of events like death of principal, insolvency of principal, etc.

6. Agent should maintain proper accounting records to enrol the

transactions run by him. Agent has to remit amounts to principal
properly.

7. Agent has to remit amounts to principal properly.

 8. Agent should not carry on delegation.

Ethical principles for an agent

Agency Disclosure

Disclose their agency status to customers at the first substantial contact.

When the conservation with a consumer gets serious, it’s time to talk about
agency and who is representing whom.

Avoid conflict of interest

An agent is required not to have double interest on the matter on hand rather
he should disclose the same whenever appropriately required.

Property Disclosure

An agents is required to disclose all known material facts about the property to
clients and customers. Omitting or misrepresenting significant information that
affects the desirability or value of a property could land you in court.

When in doubt, disclose.

Steering/ making secret profit

Uneven advertising

It is prohibited for an Agent to make a false or misleading information in

advertising and listing information. Fraud and misrepresentation can lead to
lawsuits and disciplinary actions.

Discrimination

Confidentiality

This means that agents owe their clients the duties of Confidentiality.

Unless the client has specifically said you can share his information, you
cannot disclose it. Agent has the duty to keep secret on either customer or
principle private information’s.
Exaggeration

Sometimes it’s easy to get carried away when you’re talking about a great
house or a hot market. Exaggerating or misrepresenting property condition,
market value, costs, or other factors could result in a lawsuit.

Liabilities of Agents.

Actually agents binds over principal to his activities but there are some
situations where agent comes across personal liability. Those situations are as
follows;

1. Terms of contract of agency may create personal liability to agent.

2. The tradition which is in operation in that particular type of business.

May also create personal liability to agent.

3. If agent does not behave in his capacity as agent and thus runs the
transaction in his own way, personal liability arises.

4. When agent acts for foreign principal, agent is personally liable.

5. Pretending agent is personally liable.

6. When agent acts for principal who has not come into existence, agent is
personally liable.

7. In case where principal cannot be sued, Customer sues agent and thus
agent is personally liable.

8. When agency is coupled with interest then also agent is personally liable.

19. Explain rights of third parties

Position of agent with regard to third parties

a. When an agent makes a contract on behalf of a disclosed principal and within

his actual authority, he is not liable to the third party on the contract nor can
 he sue the third party on it as the agent is not a party to the contract.

b. If it is expressly provided in the contract with the third party that the agent
shall be personally liable to the third party independent of his principal, the
third party may sue the agent under the terms of the contract.

c. As a general rule, an agent is not personally liable in a contract to a third party

for failing to carry out a contractual duty owed by his principal to the third
party but which has been delegated by his principal to him to perform on the
principal's behalf. The third party should proceed against the principal for any
loss suffered as a result of the principal's failure to perform the duty.

d. The agent can be sued by the third party under a contract where the existence
of the principal is undisclosed at the time the contract is made by the agent in
the agent's own name but in fact on the principal's behalf.

e. Where an agent, by words or conduct, represents to a third party that he has

authority to act on behalf of a principal, and the third party is induced by such
representation to enter into a contract with the agent, the agent is deemed to
have warranted that the representation is true, and is liable for any loss caused
to such third party by a breach of that warranty of authority, even if the agent
is under a mistaken belief that he had such authority.

f. Where a third party suffers any loss or injury caused by the tort (that is, any
wrongful act or omission that violates the rights of another) of the agent while
acting on behalf of the principal, the agent is personally liable to the third party.
The general rule is that the agent cannot escape liability by claiming that he
acted under the authority or instructions of the principal.

20. Describe irrevocable agency

Define irrevocable Agency
When an agency cannot be terminated or put an end to, it is said to be an
irrevocable agency in following cases:

Identify irrevocable Agency

Irrevocable agency can be witnessed in following cases:

1. Where the agency is coupled with interest.

Where an agent has an interest in the subject matter of the contract entered
into by him with a third party, his authority is coupled with the interest. He
has, in such case, the right to sue or be sued, but only to the extent of his
interest.
2. Where the agent has incurred a personal liability.

When an agent incurs personal liability, the agency becomes irrevocable.

The principal cannot, in such case, withdraw leaving the agent exposed to
the risk or liability he has already incurred in the process of his agency.
3. Where the agent has partly exercised the authority: The
principal cannot revoke the authority given to his agent after the authority
has been partly exercised; so far as regards such acts and obligations as
arise from the acts already done in agency.

21. Explain the process of establishment of a partnership–

basic considerations to bear in mind

Definition and Nature of Partnership

Partnership is defined by S. 190 of the LCA as ‘the relation, which subsists
between persons carrying on a business in common with a view of profit.
No person may be a partner with himself. There must be at least two or more
persons to form a partnership and it cannot go beyond twenty persons forming
or carrying on business in partnership. The partnership comes into existence
when two or more individuals pool their skills, labor, capital and other
resources together to form a business concern jointly.
Persons who have entered into partnership with one another are called
collectively a "firm", and the name under which their business is carried on is
called the "firm name".

The essential elements/ characteristics in a Partnership relationship

which is as follows:
1. A business must be carried out which means an active occupation or
profession carried on with some degree of continuity.
Normally an isolated act even if it is part of the exercise of the trade or
profession will not constitute the carrying on of a business by them
unless there is some intention shown.
2. It must be carried on by persons in common in that each partner is
entitled to participate in managing the partnership business.
It does not matter if all partners or one partner is active, what is
important is that the business must be carried on either by or on behalf
of all the alleged partners. Moreover the business must be the same
business, if it is separate business then that cannot be a partnership.
3. With a view of Profit. The partners must intend that the business of the
partnership makes a profit for them. A not for profit club or society is not
a partnership.
4. The relationship, which subsists, is one contract. A partnership
agreement is a contract. However, it is not enough just to agree to be
partners; you must also be in a business, which has started, Preparation
stage is not partnership contract.
5. Sharing gross profit. According to Sir Montague Smith in Mollowo, March
& Co v Court of Wards (1872) LR 4 PC 419 at 436, “to constitute a
partnership the parties must have agreed to carry on business, or to
share profit in some way common. Thus in a partnership, each partner is
an agent whose acts are binding on the other partners who are his
 principals, and each partner is again a principal who in turn is bound by
the acts of the other partners.
Firm and Firm Name
Persons entering into partnership with one another are, for the purpose of
Partnership Act, called collectively a firm, and the name under which their
business is carried on is called the firm name. Contrary to popular believe, a
partnership does not have to be created by a formal deed.
For example, two individuals, who have started a business in retailing in
pursuance to an agreement to become partners, will be considered by law to be
partners until the conclusion of the partnership agreement.
Formation of Partnership

Requirements for an effective partnership agreement

1. The supremacy of the partnership agreement. The legal relationship
between partners depends on the terms of their partnership agreement.
Those terms may be express or implied
2. Capacity and legality. There are few formalities to be complied with in
the creation of a partnership. Generally, the existence of a partnership
depends on whether the three essential elements of a partnership exist.
However, there are two restrictions on the ability of persons to associate
together as partners:
 Not all persons have the legal “capacity” to be partners. Any two or
more persons may become partners provided they are not subject
to a contractual incapacity. Section 211 of the LCA
 A partnership cannot be lawfully formed if its formation would be
illegal because it contravenes a statute or the common law.
Capacity to be a partner
3. There must be a written agreement ( Partnership Deed)
4. if partners propose to carry on business under some name other than
the names of the partners, a “firm name” or “business name” must be
 registered under the appropriate Business Names Act in operation in
each State and Territory
(Business Names Registration Act)
Classification of/types of Partnership

There are two types:

Partnership at will

It is formed for an uncertain period of time or continues even after the

completion of the work. The time period and stability depend on the partners.

General Partnership

Is an association of two or more people each with unlimited liability who are
actively involved in the business. In this partnership each partner is a general
partner.

Relation of partners to one another S. 192-194 OF LCA

The rights and obligations of partners may be governed by express agreement

among themselves. In the absence of any agreement the rights and duties of
partners are such as may be defined by the Act. However, no matter what the
terms of the agreement may be or even in the absence of any agreement there
is one element which the law implies in every partnership. This is the element
of
UTMOST GOOD FAITH.
Section 192-194 provides for other aspects governing the relationship between
partners

22. Describe the mutual rights and liabilities and ethical

underpinnings in a partnership
Mutual rights, liabilities and ethical underpinning in a partnership.
1. Partners are bound to carry on the business of the firm to the greatest
common advantage.
2. To be just and faithful to each other
3. To render to any partner or his legal representative a true account and
full information of all things affecting the firm.
4. To indemnify the firm for any damage caused to it by reason of his fraud
in the conduct of the business of the firm
5. To attend duties diligently without remuneration.
6. To share losses
7. To account for any profit

23. Explain relationship between Partners and third parties

Third parties

Someone who may be indirectly involved but is not a principal party to an

arrangement, contract, deal, or transaction.

Relationship between Partners and Third parties

The question of liability of partners to third parties may be considered
under different heads as follows:
1. Contractual liability: every partner is liable jointly with other partners
and also severally for the acts of the firm done while he is a partner.
2. Liability for tort or wrongful acts: the firm is liable to the same extent as
the partner for any loss or injury caused to a third party by the wrongful
acts of a partner, if they are done by the partner while acting in the
ordinary course of the business and with the authority of the partners.
3. Liability for misappropriation by a partner:

24. Describe the duration of a partnership

Duration of partnership
Dissolution of Partnership S. 212-215 of the LCA

i. Dissolution by court
 insanity/unsound mind
 permanent incapacity
 misconduct
 persistent breach of agreement
 just and equitable grounds eg: where the partners are not in
talking terms
 compulsory dissolution

ii. Voluntary dissolution

 by agreement
 dissolution on the happening of certain contingencies eg: when the
firm is constituted for a fixed term, or on the death of a partner

25. Explain the meaning of the contract of sale of goods

Contract of Sale of goods

A Contract where the seller transfers or agrees to transfer the property in
books to the buyer for a certain price is called Contract of Sale. The Contract of
Sale is of two types namely Sale and Agreement to Sell.

Executed contract of sale is called Sale and if contract of sale is to be executed

in future, it is Agreement to Sell.

Identify the principles for contract of sale of goods

Describe the contract of sale of goods

26. Identify the Conditions and warranties for sale of goods
Outline the conditions and warranties for sale of goods
3. Condition in a sale by sample;
A contract of sale is said to be a sale by sample where there is a term in the
contract, express or implied to that effect. In the case of contract of sale by
sample, that is; where goods are to be supplied according to a sample agreed
upon.
Section 17 of SOGA provides that the following conditions are implied;
(i) That the bulk shall correspond with the sample in quality;
(ii) That the buyer shall have a reasonable opportunity of comparing the
bulk with the sample;
(iii) That the goods must be free from any defect rendering them un-
merchantable, which would not be apparent on reasonable examination
of the sample, i.e., if the defect is apparent, that is if it is easily
discoverable by the exercise of ordinary care and the buyer takes delivery
after inspection, there is no breach of implied condition and the buyer
has no remedy.
In Jafferali Abdul V Jan Mohammed 18 ACA 21; there was sale of 22 cases
of plates by auction. The auctioneer raised up a plate and said “this is a
sample” and that the intending purchasers could inspect the goods in the
auction room. It was later discovered that many of the plates were broken and
the issue was whether this was a sale by sample. It was held that this was a
sale by sample and that in the circumstances; the seller did not accord the
buyer a reasonable opportunity to examine the goods which amounted to a
violation of the provisions of the Act.

4. Condition where a sale is by both sample and description; S.4 provides

that if goods are sold by sample as well as by description, there is an implied
condition that the bulk of the goods shall correspond with both the sample and
the description.
 In Nichol V Godts (1854) 10 EX 191, the plaintiff agreed to sell some oil
described as “foreign refined rape oil “, warranted only equal to sample. The oil
supplied, though corresponded with the sample, was adulterated with hemp
oil. It was held that since the oil supplied was not in accordance with the
description, the buyer was entitled to reject the same.

5. Condition as to fitness for purpose; an implied condition is deemed to

exist on the part of the seller that the goods supplied shall be reasonably fit for
the purpose for which the buyer wants them, provided the following conditions
are fulfilled;
(i) The buyer should have expressly or impliedly made known to the seller
the particular purpose for which the goods are required;
(ii) The buyer should rely on the seller’s skill and judgment;
(iii) The goods sold must be of a description in which the seller deals, in
the ordinary course of his business, whether he is the manufacture or
not.
If the goods to be supplied can be used for several purposes, the buyer must
expressly make known to the seller the specific purpose for which he needs the
goods. In Re Andrew Yule & Co. (1932) A.I.R. 879, a buyer ordered for
Hessian cloth which is generally used for packing purposes, without specifying
the purpose for which he wanted it. The cloth was supplied but the buyer
found it unsuitable for packing food products because it had an unusual smell.
It was held that the buyer had no right to reject the cloth since it was generally
suitable for packing purposes. The buyer ought to have disclosed his particular
purpose to the seller in order to make him liable for the breach of implied
condition as to fitness.

Implied Warranty
1. There is an implied warranty that the buyer shall have and enjoy
quiet possession of the goods. And also an implied warranty that the
 goods shall be free from any charge or encumbrance in favour of any
third party, not declared or known to the buyer before or at the time
when the contract is made.
Where such quiet possession is disturbed in any way by a person having
a superior right than that of the seller, the buyer would be entitled to
claim damages from the seller

2. Warranty of freedom from encumbrances;

S. 14 (b) further provides that in a contract of sale, there is an implied
warranty that the goods shall be free from any charge or encumbrance in
favor of any third party, not declared or known to the buyer before or at
the time when the contract is made. If the buyer discovers afterwards
that the goods are subject to a charge which he/she has to discharge,
there would be breach of an implied warranty and the buyer would be
entitled to damages. E.g. where goods sold had been previously pledged
and then sold off before satisfaction of the pledge amount or where the
goods are sold subject to a lien which was not known to the buyer. E.g. a
car from a garage whose repair expenses are not yet paid.

27. Explain the principles of transfer of property

Define the meaning of transfer of property

Transfer of Property in Goods (Rules on passing ownership)
Understanding transfer of ownership/property is crucial in sale of goods
because usually risk follows ownership. Therefore unless otherwise agreed the
goods remain under the ownership of the seller until ownership is transferred
to the buyer. Where there is a contract for the sale of unascertained goods
ownership of the goods is not transferred to the buyer unless and until the
goods is ascertained (identified). But for a contract for the sale of specific or
ascertained goods, the property in the goods is transferred to the buyer at such
time as the parties to the contract intend it to be transferred.

Essentials for Transfer of Property

The two essentials requirements for transfer of property in the goods are:
1. Goods must be ascertained: Unless the goods are ascertained, they (or
the property therein) cannot pass from the seller to the buyer. Thus,
where there is a contract for the sale of unascertained goods, no property
in the goods is transferred to the buyer unless and until the goods are
ascertained
2. Intention to PASS Property in Goods must be there: In a sale of specific
or ascertained goods the property in them is transferred to the buyer at
such time as the parties to the contract intend it to be regard shall be
had to the terms of the contract, the conduct of the parties and the
circumstances of the case

Principles of transfer of property

S. 20 provides for the rules of passing ownership from the buyer to the
seller.
(a) where there is an unconditional contract for the sale of specific goods, in
a deliverable state, the property in the goods passes to the buyer when
the contract is made, and it is immaterial whether the time of payment or
the time of delivery or both be postponed;
In the case of Dennant v. Skinner and CollomTarling v. Baxter
(b) where there is a contract for the sale of specific goods and the seller
is bound to do something to the goods for the purpose of putting them
into a deliverable state, the property does not pass until such thing is
done and the buyer has notice thereof;
In the case of Underwood Ltd v. Burgh Castle Brick
(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
 some other act or thing with reference to the goods for the purpose of
ascertaining the price, the property does not pass until such act or thing
is done and the buyer has notice thereof;
(d) when goods are delivered to the buyer on approval or "on sale
or return" or other similar terms the property therein passes to the
buyer–
(i) when he signifies his approval or acceptance to the seller or does any
other act adopting the transaction;
(ii) if he does not signify his approval or acceptance to the seller but retai
ns the goods without giving notice of rejection, then, if a time has been
fixed for the return of the goods, on the expiration of such time if no time
has been fixed, on the expiration of a reasonable time; and what is a
reasonable time is a question of fact;
In the case of Poole v. Smith’s Car Sales (Balham) Ltd
(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 (dealing with something however as if you
were the owner) to the contract, either by the seller with the assent of the
buyer or by the buyer with the assent of the seller, the property in the
goods thereupon passes to the buyer and that assent may be express or
implied, and may be given either before or after the appropriation is
made;
in the case of Pignatario v. Gilroy and Edwards v. Ddin
(f) Where, in pursuance of the contract, the seller delivers the goods to the
buyer or to a carrier or other bailee or custodier (whether named by the
buyer or not) for the purpose of transmission to the buyer, and does not
reserve the right of disposal, the seller is deemed to have unconditionally
appropriated the goods to the contract.

28. Explain the rights in ownership and possession

Define rights of ownership
The right of possession (jura possessionis)

Means that someone currently holds something in hand and this person may
be the temporary keeper or the long-term owner of an object.

This term is most commonly used in regards to property and is a land-backed

asset. This legal tradition holds that whoever occupies property and uses it for
its social function has the right to possess it.[1]

Examples
Several examples have been given of the right of

 A business buys a vehicle and obtains financing. The company

purchasing the vehicle becomes the registered owner and has both
possession and right of possession. The financial organization providing
financing would become the lienholder and have a security interest that,
upon default, would ripen into a right of retention (ius retentionis). If the
business that bought the vehicle then rented it to someone, that
individual would then have possession but would not have right of
possession. The company renting the vehicle to them could repossess the
vehicle, for example, if they hold the vehicle past the contract period.
Also, if the rental company missed payments to the lienholder, the
lienholder could repossess the vehicle from the person having possession
as well.
 I purchase a pen at a store. I have all three attributes (possession, right
of possession and right of property). If I loan the pen to someone, they
have only possession. If they fail to give it back, they conceivably could
have all three, if I was unable to find them, since it is unlikely it would be
possible for me to prove that an inexpensive item such as a pen was
borrowed and not returned.
29. Explain the Rights of seller and buyers

Seller
A party that makes, offers or contracts to make a sale to an actual or potential
buyer.
In Black’s law dictionary seller is the one who sells anything; the party who
transfers property in the contract of sale. The correlative is “buyer,” or
“purchaser.” Though these terms are not inapplicable to the persons concerned
in a transfer of real estate, it Is more customary to use “veudor” and “vendee”
in that case.

Buyer

One who buys; a purchaser, particularly of chattels

Outline the Rights of Seller and Buyer

The remedies of the buyer when the seller fails to deliver the goods;

 to be paid the amount of money as the price to the goods sold

 the seller has a right to possess the goods

 the seller has a right to reject transfer of the goods to the buyer

 the seller has a right to stop the goods which are in transit

 right to claim for the price

 right to claim for damages

 an order for specific performance

 recover possession of the goods

30. Identify types of companies

Meaning of Company

Company is an association of persons coming together with a common motive

of doing business which is legal in nature to earn profits out of the same and
share it among themselves as agreed.

Different types of Companies

There are different kinds of companies that can be established to do business

and earn profits. Kinds of companies we generally see are as follows

Public Company

The Company which has a paid-up of Rs 5 lakhs and more is called as a public
company. A public company requires a minimum of 7 members to form the
company and there is no restriction of maximum number. It must have atleast
3 directors. The directors of the public company must file with the registrar of
companies to act as a director to a public company. The public company can
issue its shares for subscription to general public. The share and the
debentures sold can be easily transferable.

Private company

The Company which has a paid-up capital of Rs 1lakh and more can be a
private company. To form a private company minimum 2 members are required
and the upper limit is 50. For a private company minimum 2 directors are
needed and they do not need any filing with registrar of companies. The shares
cannot be transferred as that is restricted by the articles.

According to control power

Holding Company
When a company is having a holding on another company then that company
is called as a holding company. The holding companies generally have
maximum share in a company it is having hold over it.

Subsidiary Company

A company is a subsidiary when it controlled by another company. Its

organization and working is mostly controlled by another company. The share
of a subsidiary company will be mostly under the control of another company.

Place of incorporation

Foreign Company

When a company established outside India and its paid-up capital share of 50
percent and above is held with an Indian, it is called as a foreign company.
Domestic company
According to the status

Government Company

The Company having a paid-up capital in which the Government’s share is

more than 51 percent is a government company. The government company is
controlled mostly by the government. For instance, the auditor of a government
company is appointed by the government after consultation and advice from
the Comptroller and Auditor General of India. The annual reports of these
companies are placed before the parliament of India.

Statutory Company

A company that is established by a special act or statute of the legislature is a

statutory company. These companies are generally created for public services
and utilities. Eg

According to liability

Companies limited by shares S. 3 (2) (a)

This is the most common kind of companies. Members of the company take
shares issued by the company. Each share is assigned a nominal value - the
amount that must be paid to the company for the share. When the company is
registered, its memorandum must state the total nominal value of all the
shares it is going to issue
Companies limited by guarantee S. 3 (2) (b)
These are companies that are formed for charities or clubs and not for profit or
benefit. Here every member agrees to contribute a specific amount of money to
the company’s assets in the event the company is wound up. Members must
guarantee. This is according to section
Unlimited liability company S. 3 (2) (c)
Members have unlimited liability (If company is being wound up, members can
be made to contribute to the company’s assets without limit to enable it to pay
its debts)

31. Explain the procedure for the establishment of a company

Procedures for the establishment of a company

a) Choice of the type of the company

Firstly one must choose between a limited and an unlimited company. The
disadvantage of the latter is that its members will ultimately be personally
liable for its debts and for this reason they are likely to be wary of it if the
company intends to trade, see section 3 (2) (c) of Cap 212 R.E 2002

b) Name search

Section 20 of Cap 212 R 2002 the registrar may, on application of the written
application reserve a name pending registration of the company after name
being cleared to have not existed or identical to other existing company names.

c) Memorandum and Articles of association

The next step is to prepare the memorandum and articles. The Companies
Act provides that a regards each of the various types of companies, these
documents shall be in the form specified by regulation (written). In other
hands, it, and any other type of company 3which will have to register articles
may, in them, adopt by reference any provisions of Table A, see section 11 (1)
Cap 212

d) Lodging of document.

The final step is to lodge certain documents at the companies Registry. The
first of these documents are memorandum and articles of Association must
each have been signed by each subscriber in the presence of at least one
attesting witness, See section 5(1) Cap 212 also Section 14 of the same Act
make it necessary to attach form number 14b

e) Registration and Certificate of Incorporation

If the registrar is satisfied that the requirements for registration are met and
that the purpose for which incorporators are associated is lawful, he issue a
certificate of incorporation signed by him or authenticated under his official
seal. Section15of Companies [Cap 212] states that on the registration of the
memorandum of a company the Registrar shall certify under his hand that the
company is duly incorporated.

Documents required for the registration/ forming an incorporated

company
The documents required for the registration of or forming an incorporated
company are the Memorandum of association, Articles of Association,
statement of nominal capital, declaration of compliance and a list of directors.
Each of the above-mentioned documents is elaborated below:

(i) The Memorandum of Association

This is a basic and crucial document for the incorporation of a company which
sets out the basic constitution of the company and presents the company to
the outside world.

(ii) Articles of Association

‘Articles of Association’ is another crucial document required for registration of

a company. It contains in the main the regulatory framework of the company
from within; that is the company itself.

(iii) Statement of nominal capital

(iv) Declaration of compliance

Section 14 of the Companies Act provides as stated above that the

memorandum and articles of association (also collectively abbreviated as
MEMARTS) shall be delivered to the Registrar of companies for registration.

(v) A list of directors (s. 14(2)

Consequences of incorporation of a company.

A separate legal entity

The most important legal consequence of incorporation is the fact that upon an
association’s incorporation, it becomes a legal person distinct from
shareholders..

Protection of shareholders’ interests in the assets constituting their

shares

The fact that incorporation creates an association into a separate legal

personality from its members may also become disadvantageous to the
members’ interests. For example, a trader who enjoys insurable interests in his
assets and then sells his business to the company may lose his right of
insurable interest in the said asset.

Limited liability

The phrase “limited liability” means the liability of members is limited while the
liability of the company is unlimited in respect of the debts of the company.
This means all companies have unlimited liability for their own debts.

i. Ownership of property

The company, being a separate legal entity, upon incorporation it owns its own
property distinct from the property of its members.

ii. Contractual capacity

A company, possessing a legal personality, can enter into contracts just as a

natural person subject to complying with other legal requirements discussed
under the section dealing with the law of contract. Since the law permits the
company to enter into contracts, it follows that it can also sue and be sued on
its contracts.
Perpetual succession

A company enjoys continuity, irrespective of death or incapacity of some or all

of its members.

Transferability of membership

Membership to the company is evidenced by the shares one holds in it. The
extent of interest is signified by the amount of shares one holds in the
company.

Facilitates borrowing power

Incorporation of an association, as opposed to sole trader business names and

partnerships avail to the members through the corporate entity the greater
possibility of borrowing.

Companies have the advantage of giving a floating charge as security for a loan;
something that is not available to an unincorporated trader or partnership. A
floating charge is a mortgage over the constantly fluctuating assets of the
company.

Separation of ownership from management

A company is administered and managed by its managerial personnel i.e. the

Board of Directors. The shareholders are simply the holders of the shares in
the company and need not be necessarily be the managers of the company.

Contractual capacity

A company can enter into any contract in its own name, and is liable on any
such contract. The separate legal existence from its members and directors
allows a company to sue or be sued in its own name. The extent of liabilities
arising from such litigations is unlimited for the company. However, the
liability of the members of the company is limited.
Separate property

A company is a distinct legal entity. The company’s property is its own. A

member cannot claim to be owner of the company's property during the
existence of the company. This allows a company to own and manage its assets
without any interference from its members. However it can sometimes bring
unnecessary hardships to the shareholder

32. Describe the Management of companies – directors

Directors
A person who is in charge of an activity, department, or organization. Or
Member of the board of people that manages or oversees the affairs of a
business.
S. 2 CA includes any person occupying the position of director by whatever
name called.

Functions of Company’s directors

Function of directors are to perform operational and strategic business

functions such as:

 managing people
 looking after assets
 hiring and firing
 entering into contracts
 S. 159. Duty to prepare director's report

33. Explain ethical dimensions of directors duties

Identify ethical dimensions of directors

We define ‘ethics’ as ‘the standards of conduct according to which business
decisions are made’. An ethical issue in the context of a business is hence a
subject which raises questions about the standards of conduct which are being
adhered to by the company as distinct from the financial results of the
conduct.

 Director Responsibilities/ S. 185. Directors duty of care

The Board represents the interests of shareholders, as owners of a corporation,

in optimizing long-term value by overseeing management performance on the
shareholders' behalf. The Board's responsibilities in performing this oversight
function include a duty of care and a duty of loyalty.

 Conflict of Interest.

Directors must avoid any conflicts of interest between the director and the
Company. Any situation that involves, or may reasonably be expected to
involve, a conflict of interest with the Company, should be disclosed promptly

 Corporate Opportunities.

Directors are prohibited from taking for themselves personally opportunities

related to the Company's business, using the Company's property, information,
or position for personal gain; or competing with the Company for business
opportunities

 Confidentiality.

Directors should maintain the confidentiality of information entrusted to them

by the Company and any other confidential information about the Company
that comes to them, from whatever source, in their capacity as a director,
except when disclosure is authorized or legally mandated

 Compliance with laws, rules and regulations; fair dealing .

Directors shall comply, and oversee compliance by employees, officers and
other directors, with laws, rules and regulations applicable to the Company,
including insider trading laws.

 Encouraging the reporting of any illegal or unethical behavior.

Avoid any kind of fraud. S. 72. Liability of directors in respect of reduced

shares

 Compliance procedures; waivers.

Fair procedures should be followed in dealing with any company’s affairs

Duties of directors of a company

Directors are responsible for ensuring the success of the business and
compliance with relevant regulations - such as health and safety, employment
law, tax and corporate governance.

S. 185. Directors duty of care

S. 183. Director's to have regard to interests of employees

172. Directors' statement and certificate

Duty to convene a meeting S. 148. Minutes of proceedings of meetings of

company

34. Describe the status of directors and their relations with

company

The status of directors in relation to their company

A director is an officer of the company. S 36 (Power of Directors to bind the
company)

Many directors work under a contract for services and are therefore paid a
fee. In these circumstances, they would be regarded as self-employed.
However, it's possible for them to work for you under a contract of service,
making them an employee. If so, you must pay them a salary and make
deductions through the PAYE (Pay As You Earn) system. However, National
Insurance arrangements are different for directors compared to other types of
employee.

Note that directors who are employees will also benefit from certain
employment-protection rights not available to non-employees, eg the right to
claim unfair dismissal.

35. Describe the procedure during conflict of interest

Define the meaning of conflict of interests

A conflict of interest can occur in business or in public life. This happens when
a person has a divergence between what she might gain on a personal, perhaps
financial level, and her professional responsibilities.

If this potential for conflict is disclosed and dealt with correctly, no serious
repercussions will follow.

However, if it is not properly addressed, a conflict of interest has the potential

to damage the people involved and also the whole organization. A recognition of
the potential for conflict of interest is crucial.

All too often these issues erupt when something goes wrong when the outside
world becomes aware of the conflict of interest and the worst is assumed.

Explain the procedures to resolve conflict of interests

Develop a clear policy on disclosure, so that all employees or board members

know what outside interests must be divulged.
Sometimes these issues are suppressed not because of ill-intent but because
the person either did not recognize the conflict or did not fully disclose it in
good time.

Disseminate this policy and information to all relevant parties.

If appropriate (perhaps in the case of a public body), also make this

information available to the world at large. This encourages openness and
minimizes the chances of later misunderstandings.

Keep the policy proportionate.

For instance, it may be that a person who has a conflicting interest should just
withdraw from particular meetings or decision-making processes. There may be
no problem with the person dealing with other issues within the organization.

Develop a clear policy to deal with situations where a person does not
disclose conflicting interests.

This can be a serious issue, and a disciplinary procedure may need to be

instigated. It may be necessary to act swiftly and decisively in this situation, as
allegations of corruption can be extremely damaging and can tarnish the
reputations of others who may not even have been involved.

36. Explain Ultravires exercise of powers

Define the meaning of ultra vires in relation to company law

Doctrine of Ultra Vires

The doctrine of ultra vires relates to the capacity or power of the company,
when the company acts beyond its powers it is said to have acted ultra vires.
Usually, actions done ultra vires are invalid and hence not binding on the
company.

Identify the categories of Ultra vires in relation to company

objectives

Describe the categories of Ultra vires in relation to company

objectives
37. Describe loans to connected persons

Define loans

Identify the conditions for loans

Explain the procedures for loans

38. Describe fraudulent trading

Define fraudulent trading

Identify fraudulent trading

Explain fraudulent trading

39. Explain Insider trading/dealing
Define insider trading

Identify insider trading

Describe insider trading

40. Describe Production and sale of sub-standard and/or
unsafe goods.

Define production and Sale of sub-standard and/or unsafe goods

Identify production and Sale of sub-standard and/or unsafe goods

Explain production and Sale of sub-standard and/or unsafe good

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"Ora et labora (et lege), Deus adest sine mora……. Deo gratias” per Mbogoro