BBA124 Business Law Module

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    MODULE DESCRIPTOR

    Module Name: BUSINESS LAW

    Module Code: BBA140

    Aims

    To introduce students to the basic principles and practice of modern legal systems. To beable to understand the legal requirements of modern business.

    Learning Objectives.

    On completion of this module a student should:

    Understand the social necessity of law. Have a broad understanding of the domestic court system and related infrastructure. Be able to distinguish between civil and criminal case law. Be familiar with relevant legal language and terminology. illustrations, using diagrams and examples.Content.

    1. General Principles of the Domestic Legal System, Sources of Law, Definitions ofCriminal Law and Civil Law, Court Structure, The Legal Profession (the roles ofSolicitors & Barristers), Precedent.

    2. Contract Law: Definition of a contract, Classification, Offer & Acceptance,Consideration, Intention, Capacity, Remedies, Useful Cases, Citations, Contents of aContract Terms: Express & implied, Appropriate Case Law, Sale of Goods ExclusionClauses, Misrepresentation, Mistake, Restraint of Trade, Discharge of contract (Breach,Anticipatory, Agreement, Frustration, Illegality).

    3. The Tort of Negligence - General Principles, Useful Cases, Duty of care, Defences inTort.

    4. Law of Business Organisations: The Concepts of Limited Company, Partnership andSole Trading, Unincorporated associations. The Relevance of Legislation in BusinessOrganisation: The relevant Companies and Business Names Acts.

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    Assessment.

    3-hour examination. Candidates must answer 5 out of eight questions. Candidates will be expected to show that they can apply their knowledge of economictheory and principles to the economy of the UK or their own country. Credit will be given for appropriate illustrations, using diagrams and examples.

    Reading.

    1. Principles of Contract Law by Richard Stone, published by Cavendish Publishing.2. English Legal System by Elliot & Quinn, published by Longman.3. Law of Tort by John Cooke published by Longman.

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    BUSINESS LAW

    Essential Reading

    Testbooks

    Christie R.H., (1993) The law of Contract in South Africa, Butterworths, Durban

    Swanepoel JPA (1995) Introduction to Mercantile Law, Eighth Edition, Juta & Co(Ltd)

    Purchasing and Sale

    1.0 What this Unit is about

    In this Unit we now look at a special type of contract. This is a contract which hasown essential

    requirements. This is very common type of contract which we all enter intowithout much thought.

    2.1 What you will Learn

    When you come to the end of the Unit, you should be able to:

    * Objective

    - Define a contract of sale

    - Distinguish between things which can and cannot be bought orsold;

    - Discuss requirements for ownership to pass from seller to buyer;

    - Explain the concept of risk in contract of sale;

    - Discuss the various methods by which delivery may be effected;

    - Explain the duties of the buyer and seller;

    - Describe some special types of sale for example Cost Insuranceand Freight,

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    Free on Board and Sale on Approval.

    3.2 Essential Elements of a contract of Sale

    We must remember that a contract of sale is a contract just like any other contract, thus it

    must meet all the essentialelements of a contract which have already been considered in Unit 2; that is, theagreement must be legal, parties musthave contractual capacity, terms must not be vague, it must be enforced etc.

    further, the contract must meet those essentials peculiar to a contract of sale. These are:

    - Agreement must be one of sale. The courts will always look at thetransaction and call it what

    it amounts to despite what the parties decide to call it.

    - For example, contract of sale must be distinguished from gift or free offersor donations.They must also be distinguished from exchange or barter.

    - There must be an agreement on the article which is known as the thing/ orsubject matter

    of the sale. This is important because some things cannot be sold and thesale of others is

    restricted or subject to regulations.

    - In a contract of sale a price must be paid for the things or the parties musthave agreed that

    the price will be paid in the future. Thus an agreement to sell for free isnot a sale.

    Activity 3A

    *Objective

    - Give a list of things which cannot be sold and reasons whythey

    cannot be sold.

    - Also give a list of things which are sold subject toregulations and

    name the regulations in each case.

    3.3 Things which cannot be sold

    - The right to inheritance to a person who is still alive cannot be

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    - What are the exceptions to the nemo dat quad non dabet

    rule?

    3.4 The Price/Pretium

    There must be agreement as to the price. The price is important as itdistinguishes a contract

    of sale and gifts or donations or exchange. There can be a valid agreementto sell at a price to

    be determined by a third party who agrees. If the third party does notagree, then there is no

    sale.

    The price must be current money not in goods. However, where the valueof goods is

    insignificant, the court may still call it a contract of sale.

    3.4.1 Passing of Risk and Ownership Risk

    You should be able to understand the aspect of risk. This has no relation tothe aspect of

    ownership. Risk refers to the issue of who bears the loss due to accidentaldeteriorate,

    damage or loss to the thing after the conclusion of the contract but beforedelivery.

    This issue of risk does not arise before the contract is concluded. It alsodoes not arise

    after delivery. It is important to note that the issue of risk also entailsbenefits accruing to the

    at the same time. For example, if A buys a cow from B and there isagreement on the

    cow to be bought and the price, if the cow calves before delivery andpayment of the purchase

    price , the calf belongs to the buyer. The general rule is that risk passes tothe buyer as soon

    as the contract is concluded, or is Perfecta. This rule has nothing to dowith the issue of

    Ownership.

    There are exceptions to the general rule. These are as follows:

    - The parties are free to agree to the contract i.e. to vary general rule

    - Where the seller has delayed delivery- he is at loss and would nothave occurred

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    had he delivered timeously.

    - Where the seller is negligent in the business sense.

    - Where the sale is one of unascertained goods. Risk would only

    pass when the goods have been ascertained i.e. there has been counting, weighing andmeasuring the goods

    Before risk passes. For example, if A buys bags of maize from B,and before delivery

    B's entire stock is destroyed by fire, then risk has not passed to Abecause the goods

    have not been ascertained, weighed, counted or measured.

    - Where the contract is subject to a suspensive condition. This isbecause there is only

    Contractual relationship before the condition is satisfied. Theobligations are suspended.

    - If the contract is void for one reason or another. Because avalid contract does not give

    rise to any obligations.

    Activity 3C

    * Objective

    - Advise X in each case:

    a) X contracts for the supply of new carpet from Z (Pvt)Ltd which has been

    specifically ordered for him from a manufacturer. Beforedelivery, Z's

    premises are destroyed by fire and the carpet is lost.

    b) As in (a) except the carpet was manufactured by Z (Pvt)Ltd and had not

    been selected from the bulk of carpets earmarked for thecustomers.

    3.4.2 Ownership

    Ownership is a bundle of rights which include among others the right ofuse of the

    right of enjoyment, possession or the right to alienate the ite, Ownership isa real right which

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    can be claimed against the whole world. A person may have a right ofownership without actual

    possession of the item. Conversely, a person may have possession withoutownership.

    For ownership to pass, certain requirements must be met. These are asfollows:

    - The seller must be owner. The nemo dat quad babet principle. Thismeans one

    cannot pass a greater right than he actually has.

    - The thing must be capable of being owned. If not, then ownershipcannot be passed.

    For example, air cannot be owned.

    - The seller must intend to apses ownership while the buyer mustintend to receive ownership.

    - The purchase price must have been paid or credit must have be engiven. There is a

    presumption that sales are for cash unless the seller is taken to havewaived or given

    up his right to receive cash. Thus, in a credit sale ownership passesto the purchaser.

    Thus in Hire-Purchase transactions, ownership of goods does notpass to the purchaser

    until the payment of the last instalment.

    - The seller must have delivered the thing to the buyer. As a generalrule, delivery entails

    the seller putting the goods at the disposition of the buyer. Thusdelivery ordinarily takes

    place at the seller's place of business. We must note that at law, theseller is not obliged

    to deliver the goods to the buyer's place. Delivery is ordinarilysubject to agreement between

    the parties.

    There are however, a number of recognised ways of delivery:

    3.4.3 Actual delivery

    This is from hand to hand physical delivery otherwise known as manu demanu delivery

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    3.4.4 Delivery with a short hand

    Known as Brevi manu delivery. the buyer already possesses the merx hebuys because of a

    previous transaction: for example he had borrowed the computer. When he

    buys it the sellerdoes not have to redeliver.

    3.4.5 Delivery with a long hand

    Here the goods are bulky to be moved, or the movement of such goodsmay be for the time

    being prohibited. The seller merely points at the goods which shall then betaken to belong to the

    buyer. The is delivery longa manu

    3.4.6 Symbolic delivery

    The seller delivers something other than the goods. What is delivered heremust give the

    buyer exclusive control of the goods e.g. keys to house or bills of lading togoods still at sea.

    3.4.7 Attornment

    Goods are delivered to a third party who acts as agent of the buyer

    3.4.8 Constitutum possessorium

    The seller keeps the goods on behalf of the buyer. the courts do not favourthis type

    of delivery as it may tempt and lead to fraud.

    3.4.9 Regsitration

    Ownership in unmovable property is passed by registration according tothe provisions of

    the Deed Registries Act . Thus the purchaser of a house who has paid cashwithout having

    the house registered in his name would not become the owner.

    Activity 3D

    *Objective

    - Explain whether ownership has passed in each of

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    the following

    a) Gift is paying lobola to his father-in law. He takeshim to his cattle

    kraal and points out six beasts which he says are for

    the payment. However, there is a regulation preventing themovement of animals

    From one area to another and the father -in-lawcannot take the

    animals. Three of them are struck by lightning anddie before they

    are possessed by father in law.

    b) Gilbert borrowed a mountain bike from Mike. Mikehas migrated to

    Malawi and has no intention of coming back toZambia. The twohave agreed that Gilbert buys the bike for $2 000.00

    Mike has notpaid .

    c) Betty has bought rice from Satisfy (Pvt) Ltd acompany registered

    in Poland an overseas country. Betty has receivedthe bills of

    lading which he sells to Joe. When the rice arrivesby sea, it is

    found to be musty and unfit for human consuption.

    3.5 Duties of the seller

    We now look at what the seller is legally obliged to do. These duties do not ariseout of agreement with

    the buyer, but out of the law. This means the the duties are implied by the law.The duties are as follows:

    Duty to deliver the goods. By any method of delivery already considered. Wherethe seller delays he

    will be in mora and risk may revert back to him.

    - To keep the goods in safe custody until delivery. If the seller is negligentin the business sense,

    then he may become liable to the buyer. if the buyer delays taking thegoods, then the seller

    would be liable only for willful acts or gross negligence.

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    - Duty to guarantee undisturbed possession of the goods. (vaccua posessio).

    Remember theseller does not guarantee that he is owner. He only guarantees that no one

    with a greater title

    will disturb the buyer. However, the buyer has (loci standi) the right totake his own legalaction where his possession is disturbed by those without any title.

    - Duty to guarantee against latent defects. Latent defects are those which arenot obvious to

    the naked eye. The buyer does not have to carry out a cruel examination ofthe subject matter

    or to employ an expert to do the examination. the seller does not have toguarantee against

    patent defects. These are obvious defects such as a table with one of the

    legs shorter thanthe rest.

    - The duty would be excluded or not apply there the sale is vetstoots i.e.marx is sold as it stand.

    this fact has to be brought to the attention of the buyer

    3.6 Remedies to the Buyer

    Where the goods are defective the buyer has some remedies at law. we shouldremember that these

    remedies are for latent defects only. These are not obvious to the naked eye. Theremedies are as follows.

    3.6.1 Action Redhibitoria (Rescission)

    The defect must be material and not trivial. The test of materiality is an objectiveone not merely that this

    particular buyer, due to his whims, considers the defect to be so material. Thedefect must be latent. In

    this action the buyer must prove that the defect is of such a mature as to make themerx unfit for the

    purposes for which it was bought. also that had he known of the defect he wouldnot have bought

    the item. We must be careful not to allow the buyer who is wise after the event, tobe his own judge.

    Buyer returns the merx and gets his purchse price. This is also the case where themerx perished due

    to the inherent defect. For example, if animals bought die of an unknown disease

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    which existed at thetime of the sale, the buyer should take back the horns and get his purchased price.

    If more than ignite, id bought i.e major item and accessories - a defect in themajor item would entitle the

    buyer to action redhibitoria whereas a defect in the accessory may not.

    If the items are bought as a unit, then defect in one entitles rescission of the entireunit.

    Note: This action is different from the one where the buyer claims that thewrong goods have been

    delivered. This would amount to breach of contract.

    3.6.2 Actio Quanti Minoris

    The buyer retains the merx and claims a reduction in the purchase price. In thiscase the buyer maystill Merx anyway, or he/she may no longer be in a position to return the Merx.

    The remedy is thediferef\nce between the price paid and the market value of the item in its defective

    state.This may de deducted from the cost of repairs...

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