COMMERCIAL LAW STUDY NOTES
CONTENTS
1. Introduction
2. Sources of Kenya law
3. The structure of courts in Kenya
4. Law of persons
5. Law of tort
6. The law of contract
7. Contract of sale of goods
8. The law of contract of agency
9. Contract of hire purchase
10. Contract of law of insurance
11. The law of negotiable instruments
12. Law of property
TOPIC ONE: INTRODUCTION
Definitions of Law
The term “law” has no assigned meaning. It is used in a variety of senses. Though different writers have
attempted to explain the term, no generally acceptable explanation has been given. Different writers
explain the term law from different points of view. The study of law is referred to as jurisprudence or legal
philosophy.
According to Hart, Law is a coercive instrument for regulating social behaviour.
Law has also been defined as a command backed by sanctions. These two explanations of the term law
presuppose the existence of a sovereign body which prescribes or formulates the commands and enforces
sanctions, which is not necessarily the case.
According to Salmond, law consists of a body of principles recognised and applied by the state in the
administration of justice.
Law has also been defined as a collection of binding rules of human conduct prescribed by human beings for
obedience of human beings. Inevitably, therefore law implies rules or principles enforced by courts of law.
Rules of law are binding hence differ from other rules or regulations. Rules of law are certain.
“Law is a general rule of external human action enforced by a soverign political authority” – Holland.
In summary therefore, law is an aggregate of conglomeration of rules enforced by courts of law at a given
time.
The law of state consists of those rules of conduct and standards prescribed by people in authority for
governing and regulating peaceful relations between members of a particular community or state. State
organs eg the police department ensure compliance with the law. Disputes arising between persons bound
by the same laws are determined by courts.
Law and Morality
Morality consists of prescriptions of the society and is not legally enforceable. For example, refusing to take
your elderly and ailing father to hospital is a moral wrong. However, rules of law are enforceable. Wrongs in
society are contraventions of either law or morality or both. Some moral wrongs are also contraventions of
the law eg rape or murder. Law incorporates a significant proportion of morality and to that extent morality is
enforceable.
Purposes or Functions of Law
Commercial Law Notes Prepared by Mr. Antony Ambia Page 1
, (i) Rules of law facilitate administration of justice. It is an instrument used by human beings to
achieve justice.
(ii) Law assists in the maintenance of peace and order. Law promotes peaceful co-existence, that is,
prevents anarchy.
(iii) (iii) Law promotes good governance. It ensures that those in authority do not practice high
handedness.
(iv) (iv) Law is a standard setting and control mechanism. The power and authority of one organ or
institution is checked by another organ or institution eg the power of the president is checked by
parliament. The president only appoints some public servants subject to approval of parliament
(v) (v) Provision of legal remedies eg compensation, injunction, specific performance, damages. It
also ensures protection of rights of weaker members of the society.
Types and Classification of Law
Rules of law may be classified as:
Written and Unwritten
National and International
Public and Private
Substantive and Procedural
Criminal and Civil
Written Law
These are rules of law that have been reduced into a written form. They are embodied in a formal document
for example The Constitution of Kenya, laws made by parliament (statutes). Such laws prevail over unwritten
Law.
Unwritten Law
These are rules of law that have not been reduced into written form. They are not embodied in any single
document for example African Customary Law, Islamic Law, Hindu Law, Common Law, Equity. Their
existence must be proved.
National or Municipal Law
These are rules of law operational within the boundaries of a country. It regulates the relation between
citizens and between citizens and the state. It is based on Acts of Parliament, customary and religious
practices of the people.
International Law
It is a body of rules that regulates relations between countries/states and other international persons eg
United Nations. It is based on international agreements of treaties and customary practices of states and
general principles.
Public Law
It consists of those fields or branches of law in which the state has an interest as the sovereign eg criminal
law, constitutional law, administrative law. Public law is concerned with the constitution and functions of
the various organs of government including local authorities, their relations with each other and with the
citizens. Public law asserts state sovereignty/power.
Private law
It consists of those fields or branches of law in which the state has no direct interest as the sovereign egg
law of contracts, law of tout, law of property, law of succession. Private law is concerned with day to day
transactions of legal relationships between persons. It defines the rights and duties of parties.
Substantive Law
It is concerned with the rules themselves as opposed to the procedure on how to apply them. It defines
the rights and duties of parties and provides remedies when those rights are violated e.g. law of contract,
negligence, defamation. It defines offences and prescribes punishment e.g. Penal Code Cap 63.
Commercial Law Notes Prepared by Mr. Antony Ambia Page 2
,Procedural Law
It consists of the steps or guiding principles or rules of practice to be complied with or followed in the
administration of justice or in the application of substantive law.
It is also referred to as adjective law e.g. Criminal Procedure code Cap 75, civil procedure Act Cap 21.
Criminal Law
Criminal law has been defined as the law of crimes. A crime has been defined as an act or omission,
committed or omitted in violation of public law eg murder, manslaughter, robbery, burglary, rape, stealing,
theft by servant or agent.
All crimes or offences in Kenya are created by parliament through statutes. Suspects are arrested by the
state through the police. However, individuals have the liberty to arrest suspects. Offences are generally
prosecuted by the state through the office of the Attorney General.
When charged with a particular offence the suspect becomes an accused hence criminal cases are styled as
State V Accused. Under sec 77 of the constitution the person cannot generally be prosecuted for an act or
omission which was not defined by law as a crime when committed or omitted. Under section 77 (2) (a) of
the constitution an accused person is presumed innocent until proven or has pleaded guilty. It is the duty
of the prosecution to prove its case against the accused. The onus (burden of proof) rests on the
prosecution.
The standard of proof in criminal cases is beyond any reasonable doubt. In the event of any reasonable
doubt the accused is set free (acquitted). The court must be satisfied that the accused committed offence as
charged. If the prosecution discharges the burden of proof the accused is convicted and sentenced which
could take any of the following forms.
(a) Imprisonment term
(b) Capital punishment
(c) Corporal punishment
(d) Community service
(e) Fine
(f) Conditional discharge
(g) Unconditional discharge
The purpose of criminal is;
To ascertain whether or not the crime has been committed.
To punish the crime where one has been committed.
Civil Law
Civil law is concerned with violations of private rights in their individual or corporate capacity eg breach of
contract, negligence, defamation, nuisance, passing off trespass to the person or goods.
If a person’s private rights are violated, the person has a cause of action. Causes of action are recognized by
statutes and by the common law. The person whose rights have been allegedly violated sues the alleged
wrong doer. Hence civil cases are styled as Plaintiff v Defendant. It is his duty of the plaintiff to adduce
evidence to prove his case the burden of proof lies on the plaintiff.
The standard of proof in civil cases is on a balance of probabilities or on a preponderance of probabilities. It
must be more probable than improbable that the plaintiff’s allegations are true. If the plaintiff discharges
the burden of proof then he wins the case and is awarded judgment which could take any of the following
forms:
(a) Damage, i.e. monetary compensation
(b) Injunction
(c) Specific performance
(d) Tracing
(e) Rescission
(f) Winding up/liquidation
Commercial Law Notes Prepared by Mr. Antony Ambia Page 3
, Purpose of civil laws
(i) Protection of rights and enforcement of duties.
(ii) Provision of legal remedies as and when a persons rights have been violate
Branches of Civil Law
(a) Law of Contract
A contract is an agreement that is legally binding eg borrowing money from a bank. When one party
defaults in honouring its part of the bargain, the remedy available for the aggrieved party is damages.
Damages are intended to put the innocent party as close as possible to the position he would have been
if the contract had been performed.
(b) Law of Tort
A tort is a civil wrong which gives rise to claim for unliquidated damages, ie damages assessed and
awarded by courts rather than damages pre-agreed by the parties. For example, it is the duty of court
to assess and determine the extent of damage suffered by the innocent party when the tort of trespass
has been committed.
(c) Law of Trust
A trust occurs when a person called settler transfers ownership of property eg land to another person
called trustee for the benefit of another person called beneficiary. A trust imposes a strict obligation on
the trustee to administer the estate (property transferred) strictly in accordance with the conditions of
th trust. Id the trustee defaults in doing this, he (the trustee) shall be liable for breach of trust. A
trustee may be engaged to administer the estate on behalf of the beneficiary when, for example,
ownership of the property cannot be transferred to the beneficiary eg when the beneficiary is a minor
( a person under the age of eighteen).
(d) Law of Succession
Law of succession deals with how property passes on the death of a person to his heirs. Sometimes,
succession is governed by the will made by the deceased. However, when a person dies intestate
(without leaving a valid will), law of succession determines how property is shared by the heirs.
(e) Law of Property
Law of property deals with the nature and extent of rights which a person may have over the use of his
land or other property.
Commercial Law Notes Prepared by Mr. Antony Ambia Page 4
CONTENTS
1. Introduction
2. Sources of Kenya law
3. The structure of courts in Kenya
4. Law of persons
5. Law of tort
6. The law of contract
7. Contract of sale of goods
8. The law of contract of agency
9. Contract of hire purchase
10. Contract of law of insurance
11. The law of negotiable instruments
12. Law of property
TOPIC ONE: INTRODUCTION
Definitions of Law
The term “law” has no assigned meaning. It is used in a variety of senses. Though different writers have
attempted to explain the term, no generally acceptable explanation has been given. Different writers
explain the term law from different points of view. The study of law is referred to as jurisprudence or legal
philosophy.
According to Hart, Law is a coercive instrument for regulating social behaviour.
Law has also been defined as a command backed by sanctions. These two explanations of the term law
presuppose the existence of a sovereign body which prescribes or formulates the commands and enforces
sanctions, which is not necessarily the case.
According to Salmond, law consists of a body of principles recognised and applied by the state in the
administration of justice.
Law has also been defined as a collection of binding rules of human conduct prescribed by human beings for
obedience of human beings. Inevitably, therefore law implies rules or principles enforced by courts of law.
Rules of law are binding hence differ from other rules or regulations. Rules of law are certain.
“Law is a general rule of external human action enforced by a soverign political authority” – Holland.
In summary therefore, law is an aggregate of conglomeration of rules enforced by courts of law at a given
time.
The law of state consists of those rules of conduct and standards prescribed by people in authority for
governing and regulating peaceful relations between members of a particular community or state. State
organs eg the police department ensure compliance with the law. Disputes arising between persons bound
by the same laws are determined by courts.
Law and Morality
Morality consists of prescriptions of the society and is not legally enforceable. For example, refusing to take
your elderly and ailing father to hospital is a moral wrong. However, rules of law are enforceable. Wrongs in
society are contraventions of either law or morality or both. Some moral wrongs are also contraventions of
the law eg rape or murder. Law incorporates a significant proportion of morality and to that extent morality is
enforceable.
Purposes or Functions of Law
Commercial Law Notes Prepared by Mr. Antony Ambia Page 1
, (i) Rules of law facilitate administration of justice. It is an instrument used by human beings to
achieve justice.
(ii) Law assists in the maintenance of peace and order. Law promotes peaceful co-existence, that is,
prevents anarchy.
(iii) (iii) Law promotes good governance. It ensures that those in authority do not practice high
handedness.
(iv) (iv) Law is a standard setting and control mechanism. The power and authority of one organ or
institution is checked by another organ or institution eg the power of the president is checked by
parliament. The president only appoints some public servants subject to approval of parliament
(v) (v) Provision of legal remedies eg compensation, injunction, specific performance, damages. It
also ensures protection of rights of weaker members of the society.
Types and Classification of Law
Rules of law may be classified as:
Written and Unwritten
National and International
Public and Private
Substantive and Procedural
Criminal and Civil
Written Law
These are rules of law that have been reduced into a written form. They are embodied in a formal document
for example The Constitution of Kenya, laws made by parliament (statutes). Such laws prevail over unwritten
Law.
Unwritten Law
These are rules of law that have not been reduced into written form. They are not embodied in any single
document for example African Customary Law, Islamic Law, Hindu Law, Common Law, Equity. Their
existence must be proved.
National or Municipal Law
These are rules of law operational within the boundaries of a country. It regulates the relation between
citizens and between citizens and the state. It is based on Acts of Parliament, customary and religious
practices of the people.
International Law
It is a body of rules that regulates relations between countries/states and other international persons eg
United Nations. It is based on international agreements of treaties and customary practices of states and
general principles.
Public Law
It consists of those fields or branches of law in which the state has an interest as the sovereign eg criminal
law, constitutional law, administrative law. Public law is concerned with the constitution and functions of
the various organs of government including local authorities, their relations with each other and with the
citizens. Public law asserts state sovereignty/power.
Private law
It consists of those fields or branches of law in which the state has no direct interest as the sovereign egg
law of contracts, law of tout, law of property, law of succession. Private law is concerned with day to day
transactions of legal relationships between persons. It defines the rights and duties of parties.
Substantive Law
It is concerned with the rules themselves as opposed to the procedure on how to apply them. It defines
the rights and duties of parties and provides remedies when those rights are violated e.g. law of contract,
negligence, defamation. It defines offences and prescribes punishment e.g. Penal Code Cap 63.
Commercial Law Notes Prepared by Mr. Antony Ambia Page 2
,Procedural Law
It consists of the steps or guiding principles or rules of practice to be complied with or followed in the
administration of justice or in the application of substantive law.
It is also referred to as adjective law e.g. Criminal Procedure code Cap 75, civil procedure Act Cap 21.
Criminal Law
Criminal law has been defined as the law of crimes. A crime has been defined as an act or omission,
committed or omitted in violation of public law eg murder, manslaughter, robbery, burglary, rape, stealing,
theft by servant or agent.
All crimes or offences in Kenya are created by parliament through statutes. Suspects are arrested by the
state through the police. However, individuals have the liberty to arrest suspects. Offences are generally
prosecuted by the state through the office of the Attorney General.
When charged with a particular offence the suspect becomes an accused hence criminal cases are styled as
State V Accused. Under sec 77 of the constitution the person cannot generally be prosecuted for an act or
omission which was not defined by law as a crime when committed or omitted. Under section 77 (2) (a) of
the constitution an accused person is presumed innocent until proven or has pleaded guilty. It is the duty
of the prosecution to prove its case against the accused. The onus (burden of proof) rests on the
prosecution.
The standard of proof in criminal cases is beyond any reasonable doubt. In the event of any reasonable
doubt the accused is set free (acquitted). The court must be satisfied that the accused committed offence as
charged. If the prosecution discharges the burden of proof the accused is convicted and sentenced which
could take any of the following forms.
(a) Imprisonment term
(b) Capital punishment
(c) Corporal punishment
(d) Community service
(e) Fine
(f) Conditional discharge
(g) Unconditional discharge
The purpose of criminal is;
To ascertain whether or not the crime has been committed.
To punish the crime where one has been committed.
Civil Law
Civil law is concerned with violations of private rights in their individual or corporate capacity eg breach of
contract, negligence, defamation, nuisance, passing off trespass to the person or goods.
If a person’s private rights are violated, the person has a cause of action. Causes of action are recognized by
statutes and by the common law. The person whose rights have been allegedly violated sues the alleged
wrong doer. Hence civil cases are styled as Plaintiff v Defendant. It is his duty of the plaintiff to adduce
evidence to prove his case the burden of proof lies on the plaintiff.
The standard of proof in civil cases is on a balance of probabilities or on a preponderance of probabilities. It
must be more probable than improbable that the plaintiff’s allegations are true. If the plaintiff discharges
the burden of proof then he wins the case and is awarded judgment which could take any of the following
forms:
(a) Damage, i.e. monetary compensation
(b) Injunction
(c) Specific performance
(d) Tracing
(e) Rescission
(f) Winding up/liquidation
Commercial Law Notes Prepared by Mr. Antony Ambia Page 3
, Purpose of civil laws
(i) Protection of rights and enforcement of duties.
(ii) Provision of legal remedies as and when a persons rights have been violate
Branches of Civil Law
(a) Law of Contract
A contract is an agreement that is legally binding eg borrowing money from a bank. When one party
defaults in honouring its part of the bargain, the remedy available for the aggrieved party is damages.
Damages are intended to put the innocent party as close as possible to the position he would have been
if the contract had been performed.
(b) Law of Tort
A tort is a civil wrong which gives rise to claim for unliquidated damages, ie damages assessed and
awarded by courts rather than damages pre-agreed by the parties. For example, it is the duty of court
to assess and determine the extent of damage suffered by the innocent party when the tort of trespass
has been committed.
(c) Law of Trust
A trust occurs when a person called settler transfers ownership of property eg land to another person
called trustee for the benefit of another person called beneficiary. A trust imposes a strict obligation on
the trustee to administer the estate (property transferred) strictly in accordance with the conditions of
th trust. Id the trustee defaults in doing this, he (the trustee) shall be liable for breach of trust. A
trustee may be engaged to administer the estate on behalf of the beneficiary when, for example,
ownership of the property cannot be transferred to the beneficiary eg when the beneficiary is a minor
( a person under the age of eighteen).
(d) Law of Succession
Law of succession deals with how property passes on the death of a person to his heirs. Sometimes,
succession is governed by the will made by the deceased. However, when a person dies intestate
(without leaving a valid will), law of succession determines how property is shared by the heirs.
(e) Law of Property
Law of property deals with the nature and extent of rights which a person may have over the use of his
land or other property.
Commercial Law Notes Prepared by Mr. Antony Ambia Page 4
