BUSINESS LAW- GSU

07102
BB Appr I, BA IT & BIRM Appr I.
Prepared by S.Mukama
Describe the purpose and sources of
law.
• What is law?
• Meaning of the law
• Black’s Law Dictionary says that law is “a body of rules
of action or conduct prescribed by controlling
authority, and having binding legal force. That which
must be obeyed and followed by citizens subject to
sanctions or legal consequence is a law.”
Continues
• Sir John Salmond in his book, Jurisprudence, defines
law as the body of principles recognized and applied
by the state in the administration of justice. He goes
on to say, “In other words the law consists of the rules
recognized and acted on by courts of justice”. In this
definition the emphasis is placed on rules which are
enforced by the state. This is somehow a narrow
outlook of the whole concept of law.
Meaning of law continues
• Osborn’s: A Concise Law Dictionary
• A law is an obligatory rule of conduct
• A law is a rule of conduct imposed and enforced by the state
• The law is the body of principles recognized and applied by the state
in the
• administration of justice.
• Oxford Advanced Learner’s Dictionary
• A law means a rule established by authority or custom, regulating the
behavior of members of a community, country, etc.
What is legal system?
• The Constitution of any country is part of its legal
system. But when we talk of a "legal system" what do
we mean? Legal system presupposes the existence of
laws, the constitution inclusive, and regulations, the
instruments of their enforcement and the instruments
for deciding whether or not in a given case the laws or
regulations have been violated
OR LEGAL SYSTEM MEANS
• Legal regime of a country consisting of (1) a written or oral
constitution, (2) primary legislation (statutes) enacted by the
legislative body established by the constitution, (3) subsidiary
legislation (bylaws) made by person or bodies authorized by the
primary legislation to do so, (4) customs applied by the courts on the
basis of traditional practices, and (5) principles or practices of civil,
common, Roman, or other code of law.
LEGAL SYSTEM CONTINUES
• From this, we can conclude that a legal system presupposes
the existence of legislative, executive and judicial organs.
The legislative organ which takes the form of either a
Parliament, is responsible for making of ~he laws.
• The executive which comprise the administration and the
civil service is responsible for implementing the laws
whereas the judiciary and its component parts, that is, the
courts and tribunals are vested with the task of interpreting
those laws.
What makes a legal system?
1. sources of law and their hierarchy
2. law-making institutions (and their hierarchy)
3. law-enforcing institutions and their powers (mostly courts)
4. substantive and procedural principles and concepts
5. the organisation of the legal profession (the judiciary, the
lawyers)
Two major legal traditions/typse
• Civil law (continental law) system
• Common law system
Common law systems
• Most common law systems do not have codes. Great
importance is given to the decisions of judges to be followed
in later, similar cases (precedents). The decisions of higher
courts are binding on lower courts, and much of the law is
left to the courts to develop.
Civil law legal system
• Ccountries that have inherited the Romano-Germanic traditions.
• Within the civil law tradition, the French legal tradition and the
German legal tradition can be distinguished. They are based on
Roman law and they share a tradition of devising systematic,
authoritative and comprehensive codifications as their law-making
style, working from general concepts and providing solutions to
individual problems
GENERAL FUNCTION OF LAW
(a) To maintain peace and order
(b) To enhance public policy
(c) To ensure justice and economic growth
(d) To resolve conflicts
(e) Protecting Liberties and Rights
CLASSIFICATION OF LAW

• criminal and civil law

A civil suit involves a dispute between private individuals involving
either a breach of an agreement or a breach of a duty imposed by law.
WHILE Criminal Law
A body of rules and statutes that defines conduct prohibited by the
government because it threatens and harms public safety and welfare
and that establishes punishment to be imposed for the commission of
such acts.
The term criminal law generally refers to substantive criminal laws.
Substantive criminal laws define crimes and may establish punishments.
For example, the law prohibiting murder is a substantive criminal law.
CRIMINAL LAW AND CIVIL LAW
• Criminal law
 Deals with crimes and punishment
Deals with relationship between state and individual
Republic v. Accused
Accused is prosecuted by the Republic (police and state attorneys –
public prosecutors) – if found guilty is convicted and sentenced – fine
and/or imprisonment
Civil law

 Deals with relationships and disputes between persons

 The person who is wronged sues the wrongdoer
Plaintiff v. Defendant
Differences between Civil and Criminal
Cases
• Parties, in civil case, plaintiff brings case; defendant must answer or
lose by default while in criminal case prosecutor brings case;
defendant may remain silent
• Proof, in civil case it is based on the balance of probability while in
criminal case the proof is based proof beyond a reasonable doubt
• Reason, in civil case the purpose of the dispute is to settle disputes
peacefully, usually between private parties while in criminal case it is
to maintain order in society
• Remedies , in civil case, money damages (legal remedy) while in
criminal case, fines, jail, and forfeitures
CLASSIFICATION OF LAWS
• International Law
 Public international law
 Private international law
• Law which attempts to establish acceptable codes of conduct on
matters of international interest and to overcome `conflict of law` in
such matters as interpretation of contracts, movement across national
frontiers, air, sea and space travel etc.
Private international law
• Private international law is the body of conventions, model
laws, national laws, legal guides, and other documents and
instruments that regulate private relationships across
national borders. Private international law has a dualistic
character, balancing international consensus with domestic
recognition and implementation, as well as balancing
sovereign actions with those of the private sector.
Public international law
• Public international law is the body of rules that is
legally binding on States and international
organizations in their interactions with other States,
international organizations, individuals and other
entities. It covers a range of activities; such as,
diplomatic relations, conduct of war, trade, human
rights and sharing of oceanic resources. Give examples
of other areas of international law.
Continues
• Traditionally, international law regulated interactions
between States. For example, it determined how a
State treats foreign diplomats who are in its country
or how international agreements between States are
to be regulated.
Public Law and Private Law
• . PRIVATE LAW, This is the law that regulates the relationship
of the individuals. torts, contracts. Private law is the law that
is predominantly concerned with the rights and liabilities of
individuals towards each other. The involvement of the states
in this area of law is restricted to providing a proper method
of resolving the dispute which has arisen. Therefore, the
legal process gets started by the citizen who is aggrieved and
not by the state. Private law is also known as‘ civil law’ and
often it is in contrast with criminal laws.
PUBLIC LAW/MUNICIPAL LAW

• Public law is the law that is concerned with the Relationship of the
citizens and the state. This consists other different specialist areas as
follows: Constitutional law, Land law, Administrative law.
Matters within the public sphere, however, are seen as issues
relating to the interest of the State and general public and are, as
such, to be protected and prosecuted by the State. It can be seen,
therefore, that the category to which any dispute is allocated is of
crucial importance to how it is dealt with
Nature of Law

• One of the distinguishing characters of law is its

normativity. Law regulates social relations by
regulating the social behavior of man. Normativity of
means that the members of society are bound to
behave in accordance with the law. In other words,
law is binding, it is not merely advisory. This can be
done by telling him any one or all of the following:
• (i) What he may do, is allowed to do or is entitled to
do. These are permissive rules.
• (ii) What he must not do, what is prohibited to do.
These are prohibitive rules.
• (iii) What he shall or must do, or is obliged to do.
These are directive rules.
SOURCES OF LAW IN TANZANIA
• In Tanzania, there are numerous sources of law. The main ones are
• (1)Constitution
• Constitution is the foundation for a state or nation’s other laws,
providing the country’s legislative, executive, and judicial
framework. In the case of treaties, the Constitution specifies that
only the parliament must ratify them. When the parliament
ratifies a treaty, it becomes part of domestic law, with the same
weight and effect as a statute passed by the entire parliament.
•
relationship between state and law
• Discussion
Sources continues
The mother law (Grundnorm). The Constitution of the United Republic of
• Tanzania, 1977.
 All laws get their legitimacy from the Constitution
 Provides for basic rights of citizens and also obligations – bill or rights and
• obligations
 Provides for the three pillars of the state
• The executive
• Parliament
• Judiciary
Provides for separation of powers and checks and balances among
the pillars.
 Provides for the rule of law, i.e. no one is above the law. For any act
or omission one must show the legal basis for it. Even the President is
not above the law.
• (2) Statutes and agency regulations
• Statutes are passed by legislatures and provide general rules for
society.
•
Sources of law
• (3) Judicial decisions/Case laws
• Tanzania law consists of decisions by courts (judicial
decisions) that do involve interpretation of statutes,
regulations, treaties, or the Constitution. It is the
courts make such interpretations
• In addition, chief executives (the president and the
various governors) can issue executive orders that
have the effect of law.
Source of law
• (4) International law
• In international legal systems, sources of law
include treaties (agreements between states or
countries) and what is known as customary
international law (usually consisting of judicial
decisions from national court systems where
parties from two or more nations are in a
dispute).
• (5)Received Law
• Received law is applicable in Tanzania only when there is no
local written law to address the matter at issue and when
local circumstances permits. Received Law is established
under Section 2.3 of The Judicature and Application Laws
Act, Chapter 358 of the Laws of Tanzania [R.E. 2002] (JALA).
Judges may make reference to received law with such
necessary modifications to suit local circumstances. The sets
of received law are common law, doctrine of equity and statutes of
general application in force in England on 22nd July, 1920.
• (6) Customary and Islamic law
• Customary law and Islamic law is established under section 9 of the
Judicature and Application of Laws Act, Chapter 358 of the Laws of
Tanzania [R.E. 2002] (JALA).These are sets of rules developed through
customs, practices and/or usages of Tanzanian ethnic tribes and they
are accepted by Tanzanian as binding rules. The customs were
accepted by the colonial regime thus accepted to be applicable in
‘native courts’ to native parties.
The application of customary laws is only
limited to
• i) civil cases particularly on issues omarriage,succession,inheritance,
land and family relations.
• ii) Customary law applies only to members of the community
concerned.
• iii)Customary law applies only when there is no written law, does
not conflict with statutory law
Meaning and purpose and sources of
business law
Rules and principles that govern the conduct of the participants engaged in
negotiating and performing transactions by which economic objectives are
achieved.
Rules and principles that govern the formation, business relationships and
exit from business entities
 Business laws include the law of contract, sale of goods law, banking law,
• insurance law, law of agency, law of partnership, company law,
bankruptcy/insolvency law.
Purpose of business law
Regulates formation, operation and exit of business entities
 Controls anti-social activities, e.g. employer dismissing
employee out of spite.
Regulates harmful activities, e.g. forbids sale of adulterated
foodstuffs.
 Provides for remedies who have private grievances – the
law spells out the
rights and obligations of parties. If a right is violated the
injured party may seek remedy (compensation). So, business
law protects legitimate interests of the parties.
Sources of business laws inTanzania
• Class discussions
TOPIC TWO: Discuss different elements of commercial law

• LECTURE ON THE LAW OF AGENCY

• Who is an agent?
• An agent is a person who is empowered to represent another legal
party, called the principal, and brings the principal into a legal
relationship with a third party. It should be emphasized that the
contract entered into is between the principal and the third party. In
the normal course of events, the agent has no personal rights or
liabilities in relation to the contract.
AGENT
• Also the term agent is defined under section 134
of the law of contract Act to mean, an "agent" is
a person employed to do any act for another or
to represent another in dealings with third
persons and the person for whom such act is
done, or who is so represented, is called the
"principal".
Who may qualify to become a principal?
• Any person who is of the age of majority according to the law to
which he is subject, and who is of sound mind, may employ an
agent.S.135 L.C.A.
Who may qualify to become an Agent?
• As between the principal and third persons any person may
become an agent; but no person who is not of the age of majority
and of sound mind can become an agent, so as to be responsible
to his principal according to the provisions of this Act.S.136
CREATION OF AGENCY

• No one can act as an agent without the consent of the

principal, although consent need not be expressly stated.
The principal/agent relationship can be created in a number
of ways made either orally or in writing. The relationship may
also arise from the actions of the parties. It is usual to
consider the creation of the principal/agency relationship
under five distinct categories.
Creation of principal agent relationship
• Express appointment
• This is the most common manner in which a principal/agent
relationship comes into existence. In this situation, the agent
is specifically appointed by the principal to carry out a
particular task or to undertake some general function, In
most situations, the appointment of the agent will itself
involve the establishment of a contractual relationship
between the principal and the agent.
Ratification

• An agency is created by ratification when a person who has

no authority purports to contract with a third party on behalf
of a principal. Ratification is the express acceptance of the
contract by the principal. Where the principal elects to ratify
the contract, it gives retrospective validity to the action of
the purported agent. There are, however, certain conditions
which have to be fully complied with before the principal can
effectively adopt the contract;
Ratification

• or Agency by ratification arises when a person (the

principal) ratifies (that is, approves and adopts) an act
which has already been done in his name and on his
behalf by another person (the agent) who in fact, had
no actual authority (whether express or implied) to
act on his (the principal's) behalf when the act was
done.
 Implication

• This form of agency arises from the relationship that

exists between the principal and the agent. It is from
such relationship which it is assumed that the
principal has given authority to the other person to
act as his or her agent. So, whether an employee has
the actual authority to contract on behalf of his or her
employer depends on the position held by the
employee.
 Necessity

• Agency by necessity occurs under circumstances where, although

there is no agreement between the parties, an emergency requires
that an agent take particular action in order to protect the interests of
the principal.
• Conditions:-
• In order for agency by necessity to arise, there needs to be a genuine
emergency.
• The person seeking to establish the agency by necessity must have
acted bona fide in the interests of the principal
Estoppel

• This form of agency is also known as ‘agency by holding out’ and arises where the
principal has led other parties to believe that a person has the authority to
represent him or her. The authority possessed by the agent is referred to as
‘apparent authority’.
• In such circumstances, even though no principal/ agency relationship actually
exists in fact, the principal is prevented (estopped) from denying the existence of
the agency relationship and is bound by the action of his or her purported agent
as regards any third party who acted in the belief of its existence:
• To rely on agency by estoppel, the principal must have made a representation as
to the authority of the agent.
• As with estoppel generally, the party seeking to use it must have relied on the
representation
THE RELATIONSHIP OF PRINCIPAL AND AGENT
The duties of agent to principal

To perform the agreed undertaking according to the instructions of the

principal. A failure to carry out instructions will leave the agent open to an
action for breach of contract.
To exercise due care and skill
To carry out instructions personally. Unless expressly or impliedly authorised
to delegate the work
To account. There is an implied duty that the agent keeps proper accounts of
all transactions entered into on behalf of the principal.
Not to permit a conflict of interest to arise
Not to make a secret profit or misuse confidential information
Not to take a bribe
Example
• Agency by estoppel arises when A makes a representation to
a third party, whether by words or conduct, that B is his
agent, and subsequently that third party deals with B as A's
agent in reliance on such representation. A will not be
permitted (is estopped) to deny the existence of the agency
if to do so would cause damage (usually financial loss) to that
third party.
• The person who makes such representation ("A" in paragraph (a)
above) is treated as having created an agency relationship.
The rights of an agent
• An agent has the following rights:-
• To claim remuneration for services performed
• To claim indemnity against the principal for all expenses legitimately
incurred in the performance of services. Both contractual and non-
contractual agents are entitled to recover money spent in the course
of performing their agreed task.
• To exercise a lien over property owned by the principal
• This is a right to retain the principal’s goods, where they have lawfully
come into the agent’s possession, and hold them against any debts
outstanding to him or her as a result of the agency agreement.
RELATIONS WITH THIRD PARTIES

• Once an agent creates a contract between the

principal and a third party, prima facie, ‘the only
person who can sue is the principal and the only
person who can be sued is the principal’. In other
words, the agent has no further responsibility.
TERMINATION OF AGENCY

• The principal/agent relationship can come to

end in two distinct ways: either by the acts of
the parties themselves, either jointly or
unilaterally; or as an effect of the operation of
law.
1:Termination by the parties

• There are a number of ways in which the parties can bring an agency
agreement to an end:
• By mutual agreement
• Where the agency agreement is a continuing one, the parties may
simply agree to bring the agency relationship to an end on such terms
as they wish. Where the agency was established for a particular
purpose, then it will automatically come to an end when that purpose
has been achieved
1(a)By the unilateral action of one of the parties

• Because of the essentially consensual nature of the

principal/agency relationship, it is possible for either
of the parties to bring it to an end simply by giving
notice of termination of the agreement
2:Termination by operation of law

• This refers to the fact that an agency relationship will be brought to

an end by any of the following:
1:Frustration
• Contracts of agency are subject to discharge by frustration in the
same way to that of ordinary contracts.
2:The death of either party
• Death of the agent clearly brings the agreement to an end, as does
the death of the principal.
2:Termination by operation of law

3:Insanity of either party

• As in the previous situation, the insanity of either party will bring the
agency to an end; similarly, agents will have to be careful not to
breach their warrant of authority by continuing to act after the
principal has become insane.
4:Bankruptcy
• The bankruptcy of the principal
TOPIC: PARTNERSHIPS/THE LAW OF PARTNESHIPS

Nature and Formation

Types of Partners
Rights and Duties
Advantages and Disadvantages of Partnerships
Dissolution, Winding up, and Termination
NATURE AND FORMATION

• A business enterprise may be operated or

conducted by a sole proprietor, a joint venture, a
partnership, a corporation/company, or by some
other form of business organization. The
owner/owners of the enterprise determine the
form of business unit they wish to use
Definitions:

• Sole Trader/Proprietor
• Any person may set up in business and trade
under his or her own name or a business name.
Such a sole trader has independent control of
the business and all the profits are his or hers.
He or she also has total responsibility for the
legal liabilities and financial risks of the business.
• The sole trader provides all the start-up capital;
often this will involve a bank loan secured by a
mortgage on the sole trader’s home. Since he or
she is personally liable for all business debts, the
sole trader may be bankrupted by the creditors
of the business.
Meaning of partnership
• "Partnership" is the relationship which subsists
between persons carrying on business in common as
defined with a view of profit. Section 190 of the L.C.A

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". Section 190 (2)
Partnership continues
• . A partnership is defined as “an association of two or
more persons to carry on as co-owners a business for
profit”.
• “Persons” is defined to include individuals, partnerships,
corporations and other associations. That is to say it
includes both natural and legal persons.
• A partnership is regarded by common law as (a legal
aggregate), a group of individuals having no legal
existence apart from that of its members.
Partnership

• This is a type of unincorporated association, which

simply means that it is an organization without any
legal personality distinct from its members. There any
many different kinds of unincorporated associations
which exist for social, educational, political and
business purposes. You may belong to one: they
include sports clubs, pressure groups, local chambers
of commerce, trade unions and political parties, not to
speak of the Scouts, Guides and Brownies
• What distinguishes a partnership from these
organizations is the motivation of the partners:
they have joined together intending to carry on a
business with a view to making and sharing
profits.
Formation of a Partnership

• A partnership may result from an oral an oral or written

agreement between the parties, from an informal
agreement, or from the conduct of the parties. Persons
become partners by associating themselves in a business as
co-owners. Consequently, if two or more individuals share
the control and profits of a business, the law may deem
them partners without regard to how they themselves might
characterize their relationship.
•
Partnership Deed/Agreement or Articles of Partnership

• It is usual to formalize the existence of the partnership

by written agreement, which is sometimes described as
the partnership deed ,Writing is not essential, though.
• The partnership relationship may be implied from the
conduct of two or more persons carrying on a business
in common (as joint proprietors) with the intention of
making and sharing the profits arising from their
enterprise
• The partnership relationship, with all its ensuing
rights and duties, exists from the time when the
business is up and running. Planning to run a
business does not in itself create the
partnership.
Contents of Partnership Deed
• Any partnership deed should include:
The firm name and the identity of the partners
The nature and the scope of the partnership business;
The duration of the partnership;
The capital contribution of each partner;
The division of profits and sharing of losses;
The management duties of each partner;
A provision for salaries (if desired);
The right (if desired) of partner to withdraw from the
firm, and the terms, conditions, and notice such
withdrawal would require;
A provision for the continuation of the business by
the remaining partners, (if desired), in the event of
the death of a partner.
Partnership property

• Property may be owned collectively by all of the

partners and may thus amount to partnership
property.
• Partnership property consists of all property brought
into the partnership stock or acquired on account for
the purposes of the firm. Property bought with money
belonging to the firm is deemed to have been bought
on account of the firm.
Rights and Duties of the Partners/Relationship among partners

• When parties enter into a partnership, the law imposes certain

obligations on them and also gives them specific rights.
Fiduciary Duty
A fiduciary relationship, based on high standards of trust
and confidence, exists among the members of the
partnership. Each partner owes a duty of utmost good faith
(uberimae fidei), fairness and loyalty to his partners. Only on
such basis can so intimate a business relationship function.
See section 196 of the LCA.
Duty of obedience
• A partner owes his partners a duty to act in
obedience to the partnership agreement and to
any business decisions properly made by the
partnership. A partner who violates this duty is
individually liable to his partners for any
resulting loss.
Duties continues
Duty of Care
A partner must manage partnership affairs without culpable negligence.
Duty to give full information. It is the duty of every partner that he
should give all information of all things affecting the firm, to his co-
partners.
Duty to render true account. It is the duty of every partner that he
should keep proper accounts, and render correct and true accounts of
partnership.
Duty to share losses. It the duty of every partner that he should share
equally the losses suffered by the firm.
Rights among Partners:

• The law provides partners with certain rights, which include:

right in specific partnership property,
 their interests in the partnership,
their right to share in distributions,
their right to participate in management,
their right to choose associates
The authority of partners to bind the firm

• Every partner is an agent of the firm and of the

other partners. Each partner, therefore, has the
power to bind co-partners and make them liable
on business transactions. Every partner, other
than a limited partner, is presumed to have the
implied authority to enter into the following
transactions:S.201 0F THE L.C.A
The nature of partners’ liability

• Every partner is responsible for the full amount

of the firm’s liability. Outsiders have the choice
of taking action either against the firm
collectively or against the individual partners.
Where damages are recovered from one partner
only, the other partners are under a duty to
contribute equally to the amount paid. Section
203 of L.C.A
The liability of incoming and outgoing
partners
• A person who is admitted as a partner to an
existing firm does not thereby become liable to
the creditors of the firm for anything done before
he became a partner. Section 208 of the L.C.A
• A partner who retires from the firm does not
thereby cease to be liable for partnership debts or
obligations incurred before his retirement. Section
208 (1)
Section 208 (3)
• A retiring partner may be discharged from any
existing liabilities by an agreement to that effect
between himself and the members of the firm as
newly constituted and the creditors, and this
agreement may be either express or implied as a
fact from the course of dealing between the
creditors and the firm as newly constituted.
Dissolution, Winding up, and Termination

• A partnership may come to an end for a number of different reasons.

Lapse of time. Most partnerships are formed in the belief that they will be
continued indefinitely, but a specified lifetime may be stated in the
partnership agreement. For example, two people might decide to run
catering facilities for the duration of an exhibition or a trade fair.
The sole purpose of the partnership is achieved. The example in 1 above is
also relevant here.
Death or bankruptcy of a partner. Usually the partnership makes provision
for such occurrences, but failure to do so could result in dissolution.
• Illegality. If the purposes of the partnership
subsequently become illegal, the partnership contract
is frustrated. A partnership created for the import of
certain goods would be dissolved if the import of
those goods was subsequently banned by
government/law.
• Notice from a partner. Unless the agreement
provides otherwise, the partnership will terminate if
one party decides to leave. Usually provision is made
for this.
Where a partner suffers some other permanent
incapacity
Where a partner persistently breaches the
partnership agreement. This provision also relates to
conduct which makes it unreasonable for the other
partners to carry on in business with the party at
fault.
Where the business can only be carried on at a loss
Treatment of assets on dissolution

• Upon dissolution, the value of the partnership property is realised and

the proceeds are applied in the following order:
in paying debts to outsiders;
 in paying to the partners any advance made to
the firm beyond their capital contribution;
 in paying the capital contribution of the
individual partners.
•