INTRODUCTION TO ZIMBABWEAN LAW

1. The nature and origin of law

(a) The nature of law

Law is used in society to reflect social values and norms. It is one of the most effective instruments used in upholding and safeguarding community values and aspirations.Law is an instrument of state power. In ancient societies law was a weapon used by the ruling elite to consolidate their grip on power. Under the modern concept of state power, the law can be used for the same purpose.

Certain sanctioned practices are commonly referred to as undemocratic e.g. suppression of freedom of speech and deprivation of other freedoms. The force of law is used to make the practices hold. It is thus a convertible tool capable of being used for good or bad courses by those in position to mobilize it in their favour.

Slavery and apartheid to name just a few had a strong legal backing. Today they have been eradicated and the eradication largely assumed a legal backing. The law can be generalized as a set of rules designed to regulate human behaviour. Law is constantly assuming new outlooks and perspectives that are reflective of the changes in the society it serves.(b) Origin of law

The origin of law can be traced back in ancient history to the very days when man began to be organized into distinct societies. Before that man was highly mobile hunters and gatherers and there were no fixed societies. As man began to form themselves into states, the sate assumed the role of maintaining order.Law was identified as one of the main instruments the state could not only use to regulate human conduct but also to further its objectives. One of the main objectives is the maintenance of order and the attainment of fairness in society.

2. Laws and their classification

The law can be classified as follows:

2.1 Public and private law

Public law comprises those laws that regulate rights, relationships and obligations between the state or its administrative arms on the one hand and its subjects on the other.Public law is concerned with the interests of the public at large and the welfare of the state.Public law is formed from the following branches of law:

(a) Public international lawThis law governs inter-state relationships e.g. immigration laws between Zimbabwe and other countries.(b) Constitutional lawThis law is concerned with the functions of the organs of the state, namely, the legislature, the executive and the judiciary, as well as power within the state. (c) Law of procedureThe law of procedure deals with procedural aspects applicable to both civil and criminal courts in a given jurisdiction.2.2 Private law

This branch of law governs the rights and obligations where both parties involved are private persons. The word person includes companies and other organisations of a like nature. Examples include law of persons, family law, law of property, intellectual property law, law of succession, law of contract and insurance law. The fundamentals of all insurance transactions lie in contract and consequently the law governing contracts is very important to insurance students.2.3 National and international lawNational laws are laws pertaining to a particular state. Internal law is a body of rules that regulates the conduct of states towards one another.2.4 Civil and criminal law(a) Civil lawA delict is a breach of a general duty imposed by law leading to a civil action at the instance of the injured person. Civil law governs relationships between private individuals and is not concerned with the community at large.In civil proceedings it is up to the injured party to seek redress or waive his rights. In civil cases the two parties are always cited e.g. Jeki Chani versus Pita Ghost.The dominant role is to compensate the party injured by breach of legally imposed duties. Civil law can also be used to prevent a threatened wrong from being committed e.g. an injunction can be used to prevent a threatened breach of contract.

(b) Criminal lawA crime is simply a public wrong. Criminal conduct is that conduct which is viewed as harmful or prejudicial to the society at large despite the fact that the particular act complained of would have been committed against one person or a small number of people.For example, where A steals from B the view taken by the law is that such conduct is not only harmful to B alone but to the whole community represented by the State.Consequently all criminal proceedings are usually conducted and sanctioned by the state.

The state through the Attorney General plays a key role in all criminal proceedings in contrast with civil proceedings where it is up to the injured party to seek redress or waive his rights.All criminal cases cite the state as the main complainant e.g. The state versus Jeki Chani even though in reality the actual complainant would be a private individual. Because criminal law deals with public wrongs all those found should be punished. Punishment takes the form of imprisonment, payment of fines, canning or any other form of punishment which the court can legally hand out.

(c) Technical distinction between civil and criminal lawThe distinction is centered on the degree of proof legally required for a claim to succeed under the two branches of law. In our law a civil case will succeed if there is enough evidence on a balance of probabilities to support it.On the other hand a criminal prosecution will only succeed if the available evidence proves that the accused person is guilt beyond a reasonable doubt.

A lower standard of proof is used in deciding civil cases while a much high standard is used for criminal cases. This difference is understandable in view of the fact that a criminal conviction leads to punishment and one form of punishment often handed out by courts is deprivation of liberty (i.e. imprisonment). By imposing a higher burden of proof on criminal cases seeks to eliminate the danger of punishing innocent citizens.

It should be noted that some acts have a dual character and thus qualify to be civil or criminal at the same time. For example e.g. assault which is both a criminal and a civil act in one. It is possible for the wrongdoer to face proceedings under the two branches of law at the same time or on separate occasions.

Although criminal proceedings are conducted on behalf of the sate by the Attorney General, there are circumstances in which he may decline to prosecute the case brought before him.

When this happens the aggrieved party can arrange for a private prosecution with the state not playing a key role. In Zimbabwe private prosecutions are very rare presumably on account of the high costs involved.

3 The purpose and principles of law

3.1 The purpose of law

The fundamental role of law in society is the preservation of order. A society that is not governed by the rule of law can easily degenerate into anarchy.

Functions of the law are as follows:

(a) The law is one of the key instruments used by the state in the exercise of its power.(b) The law is also used in the attainment of justice i.e. fairness.(c) The law is also used for regulatory purposes e.g. the RTA Act Cap 13:11 which regulates among

other things compulsory motor insurance in respect of third party liabilities.

The law must be enforced in order to perform the above functions. To this end the state must have efficient law enforcement agencies and structures namely the courts, police and prisons.

3.2 Principles of law

The basic principles of law are as follows:

(a) Just application

The law ought to be just and reasonable, both in regard to the subject matter, directing what is honourable, forbidding what is bad. This means laws that are despotic, unjust or devoid of reasonableness will not commend themselves to society and will eventually fall into disuse or will be superceded

Law is essentially an expression of societal values and norms hence a law which fails to articulate and reflect these values cannot be sustained for long.

(b) Equality

The law should be applied equally to all persons regardless of their condition or circumstances. Class, race, culture, ethnicity and religious idiosyncrasies should be irrelevant in this respect e.g. where a poor man kills another using a knife and a rich man does a similar thing in similar circumstances the two should be treated in the same way.

However, there are situations where peculiar circumstances pertaining to each case are regarded e.g it would be unfair to treat a juvenile aged fourteen years who kills a person in the same manner as a forty year adult who commits the same offence.

(c) Uniformity

Similar to the principle of equality is the principle that law should have a general and uniform application to all people throughout the country.

If A who is a resident of Harare commits cold blooded murder is finedZ$1 million and B who is a resident of Gweru commits a similar offence and is sentenced to death, there will definitely be a public outcry. If the law is to be seen as just then there must be uniformity in its application.

(d) Authority

The responsibility to make law must be given to the proper authority. In Zimbabwe the responsibility of making law is largely the prerogative of the legislature i.e. the Parliament of Zimbabwe.

However, statutory bodies have legislative powers delegated to them by Parliament itself e.g. making of by-laws regulating activities in the area under the control by a local authority.

(e) Certainty

The law must be sufficiently certain if it is to be enforceable. If it is ambiguous an environment of legal uncertainty is created under which people are unaware of what the law says.

To facilitate legal certainty laws must be declared and made known before they are applied. The practice in Zimbabwe and many other countries is that the new laws are promulgated (i.e. made known by publication in the official organ of the state known as the Government Gazette.

Once this is done no one can successfully argue that they did not know the law. The principle “ignorantia juris non excusa” (ignorance of the law is no excuse) then applies. Everyone is then presumed to know the law.

It should be noted that some laws are so well known that there is no need for them to promulgated. Such laws are part of common law. Laws on murder, theft, rape, etc fall in the category of common law. These laws are not the result of legislation but they are created largely by custom of the people and the decision of judges.

3.2 Sources of law

Zimbabwean Roman-Dutch law is derived from four sources, namely, Roman Law, Custom, Legislation and Judicial Precedent

(a) Roman law

Roman law forms the basis of Roman Dutch Law in Zimbabwe. Rome was founded in approximately 753 B.C. The earliest Roman law was developed during the monarchy and the law was a mixture of religious, moral and customary rules. The monarchy came to an end with the expulsion of the last of the kings – Tarquinius Superbus (Tarquin the proud). After the monarchy came the Republic which opened the period 509 B.C. to about 27 B.C.

In the early days of the republic Roman society was divided into two conflicting groups namely – the Patricians and the Plebeians.

The Patricians as a social grouping were powerful and wealthy. They virtually owned all the major means of production and thus occupied the upper class position in society. The Plebeians on the other hand were the lower class who were severely disadvantaged both politically and economically. It was during the Republican era in approximately 450 B.C. that the Law of the Twelve Tables was passed. From 27 B.C. came the Roman Empire.

The term “Roman Dutch Law” was first used by Simon Van Leeuwen, a famous Dutch jurist living from 1625 to 1682. The term denotes a fusion of Roman law with Dutch law. The Romans spent quite a long period in the Netherlands which formed part of the then Roman Empire. During this period Roman law was absorbed into the native Dutch law.

Roman Dutch as a system of laws was introduced in the Cape when Jan Van Reibeck of the Dutch East India Company settled there in 1652. The early Dutch settlers brought with them the Roman Dutch system of law from their native country Holland (Netherlands). This system of law was initially practiced in the Cape and subsequently it spread to Natal, the Transvaal, Orange Free State and eventually into the then Southern Rhodesia (Zimbabwe).

History has it that in 1806 the British annexed the Cape Province. One of the conditions that was agreed on for the transfer of the Cape to the British was that the colonists retained their own legal system. This condition effectively meant that despite the fact that the Cape was going to be under British administration, Roman Dutch law was retained as the law of the colony.

When the Pioneer Column arrived in present day Harare in 1890, they brought with them the Roman Dutch System of law which they had been practicing in South Africa. Later on 10 June 1891 the then British High Commissioner issued a proclamation to the effect that Southern Rhodesia (Zimbabwe) was to be governed for the time being by laws applicable in the Cape colony. This heralded the official importation of Roman Dutch law into Zimbabwe where it formed the basis of our common law.

The Lancaster House Constitution of 1979 contained further provisions which effectively put the final seal on the Roman Dutch law as the legal system of the country.

Section 89 of this constitution provides:

“Subject to the provisions of any law for the time being in force in Zimbabwe relating to the application of African customary law, the law to be administered by the Supreme Court, the High Court and by any courts within Zimbabwe subordinate to the High Court shall be the law in force in the colony of the Cape of Good Hope on 10th June 1891 as modified by subsequent legislation having in Zimbabwe the force of law”

This therefore meant that even the status of Roman Dutch law as the legal system of this country was confirmed.

However an important consideration worth noting is that by the time Roman Dutch law came to Zimbabwe it already contained significant English infiltrations. In the period leading to the annexation by the British and soon thereafter, the Cape had seen an influx of English trained lawyers who were prone to refer to the English law with which they were familiar. Additionally in the early days of Zimbabwe’s colonization, an appeal lay only on the Cape Supreme Court, later to the Appellate Division of the Supreme Court of South Africa. A final appeal could be made to the Privy Council – a British court that dealt with colonial matters.

(b) Custom

A custom is a practice which by long-established usage has come to have the force of law (Collins Internet Linked Dictionary, 2006).

Custom is a recognized source of law and in this country customary law includes practices that have been accepted as binding by society and have thus become legally enforceable.

When the colonial settlers arrived in this country in 1890, Roman Dutch law was introduced as common law of the country. However, customary law as was practiced by the people in Zimbabwe was recognized as the law that was to govern relationships between the indigenous people provided that such customs were not in conflict with any legislation then in force or was not against the rules of natural justice.

Similarly those customs that were considered repugnant to good morals as determined by the colonial administrators were also banned.

For a custom to be recognized as binding and therefore legally enforceable, it had to be:

1. Reasonable2. Long-standing3. Certain4. Uniformly observed

The above requirements were enunciated in the case of Van Breda v. Jacobs. This case concerned a fishing dispute between fishermen of the Cape Coast. There was a custom amongst the fishermen to the effect that once fishermen had put their lines in a particular place for the purpose of catching fish, no other fishermen were entitled to set their lines close to those of the first group as this would have the effect of intercepting the fish which could have been caught by fishermen who had put in their lines first. The courts decided in this case that since this custom was long standing, reasonable, certain and uniformly observed in that area, it was therefore legal and enforceable.

Soon after the colonial settlement in 1890, special courts were introduced to administer customary law. These included the District Commissioner’s Courts, Chief’s courts and African Appeals Courts. Most of these courts were presided over by the colonial administrators who knew very little about African Customs and Customary Law and hence tended to apply Roman-Dutch law principles that were common knowledge to them. As a consequence of this drawback in the application of customary law, the growth and influence of custom in the development of the law was restricted.

Upon the attainment of independence, customary law was given similar recognition to Roman-Dutch law. This was done through the creation of primary courts i.e. village community courts, which did away with the racial discrimination that was inherent in the application of customary law prior to independence. Presiding officers who heard matters in these courts were appointed on the basis of their knowledge and appreciation of customary law.

The extent to which custom is still an important source of law in present day Zimbabwe society is now a highly debatable issue. Some argue that the pace of societal development is now so fast that custom cannot keep pace with it. To this extent custom is fast losing its place as a source of law.

(c) Legislation

Legislation is the promulgation of binding law in a precise and well defined form by a person or body having the legal power to do so. Legislation is the most important source of law-making today.

In Zimbabwe context the Legislature consists of the President and Parliament. Currently the Parliament consists of the House of Assembly and the Senate in which one hundred and fifty members sit. Most of these members are elected by the various constituencies they represent and the twelve are appointed by the President in terms of the constitution of the country.

The legislature can make whatever laws it considers necessary or desirable in the interests of peace, order and good government. By the same token the legislature can subsequently amend or repeal any such laws. Law made by the legislature is known as Statute law and each separate law is known as an Act which means an Act of Parliament.

Currently there at least five hundred Acts in existence and these are constantly being updated, amended and sometimes repealed. In 1963, 1974 and again in 1996 all Acts in force in the country were revised, consolidated and were published in separate consecutive volumes. Every Act is referred to by its short title and the chapter number allocated to it e.g. the Act regulating the use of motor vehicles on public roads is referred to as the Road Traffic Act (Chapter 24:03).

Sometimes an Act will generally set out the broad principles pertaining to a particular subject only and will authorize some other person or body to issue other enactments providing for the detailed administration of the Act and the implementation of the principles involved. Most of the issues covered by legislation today are so complex and technical that the legislature often delegates its power to make enactments to responsible bodies that are better qualified to understand and control the actitivities of such concerns. Such legislation is called delegated of subsidiary legislation.

The bulk of delegated legislation falls within the following well defined categories:

1. Statutory instruments

This is generic term used to describe laws passed under an enabling Act Statute law therefore comprises Acts of Parliament and statutory instruments passed under the relevant Acts.

2. Local authority orders

These are rules authorized by statute e.g. compulsory designation of property.

3. Local authority by-laws

Such laws may be formulated by a local authority to apply to a particular area under its administrative jurisdiction. By-laws are usually confined to a particular locality to deal with a problem peculiar to that area.

4. By-laws of public corporations

The power to formulate by-laws also extends to public corporations e.g National Railways of Zimbabwe, Posts and Telecommunications, Zimbabwe Electricity Supply Authority, etc. have legislative power delegated to them under the various Acts constituting them.

To safeguard against the abuse of delegated legislative powers, the following mechanisms are often employed:

(a) All subsidiary legislation must be published in the Government Gazette to ensure that the attention of the public is drawn to such an instrument.

(b) Most subsidiary legislation is subject to the scrutiny of parliament after its promulgation.(c) All delegated are supervised by the courts via the doctrine of ultra vires to ensure that

the responsible does not exceed its delegated powers.(d) The procedure specified for making such legislation must be followed and the legislation

must not conflict or violate an already existing Act of Parliament.

Loss of legal validity

1. An Act of Parliament can lose its legal validity through abrogation.

To abrogate is to abolish, cancel or repeal an existing statute law. Abrogation is normally done through the legislature which passes a new Act expressly repealing the old one. 2. An Act can also lose its legal validity through implied repeal.

This is an indirect way of repealing legislation. It operates as follows: where a provision in an Act is inconsistent with a provision in an earlier Act, the later provision may by implication repeal an earlier one in the absence of anything to the contrary.

3. An Act made for a specific period will cease to be of any legal force at the expiry of the period.

(d) Judicial precedent

Courts have developed a habit of following previous decisions within more or less well defined limits. This is called the doctrine of precedent. A precedent is a previous judicial decision which serves as a rule or guide for similar cases heard in future. This is a very important source in modern societies.

Such a decision must be made by a competent court and in Zimbabwe it means only the High Court or the Supreme Court can set precedents. The fundamental principle involved in the doctrine of precedent is embodied in the Latin maxim “stare decisis non quita movere” which basically means to stand by previous decisions and not to disturb settled points.

The decisions of the High Court and Supreme Court are binding on the inferior courts (community and village courts). The decisions of the Supreme Court are binding on all other courts including the High Court. The decisions of the inferior court do not bind any other court, even themselves.Decisions of courts of other countries are not binding on any court in Zimbabwe. However, our courts regard them as “persuasive authority”. These include decisions of the Supreme Court of Appeal of South Africa, the House of Lords, etc. The term “persuasive authority” means that the local courts will have regard to these foreign decisions and attach due weight to them but will not regard them as binding as such.

Advantages of the doctrine

1. It makes a law credibleA series of apparently contradictory decisions may result in the whole legal system losing its credibility in the eyes of the public.2. It makes the law in general more predictable.3. It enhances reliability in the law.4. It promotes equality and uniformity in the way the law operates.

Disadvantages of the doctrine

1. It allows the law to degenerate into a forest of erroneous notions as some wrong decisions made will be maintained under the cloak that “what hath been done before may legally be done again”

2. A strict application fails to allow legal rules to move with the times. Law must be both stable and dynamic.

3. Doctrine can lead to manipulation of the law by lawyers who may want to advantage from its lack of flexibility.

(e) Ratio- decidendiThis term means “the reason for the decision” or “the principle for the decision”. The ratio-decidendi refers to that part of a previous decision which possesses the rule of law upon which the decision was founded. It can also be defined as the legally material facts of a case and the decision thereon.

(f) Orbiter – dictum

These are statements contained in a judgment which are not necessary or relevant to the decision of the case (i.e. said by the way or incidentally).More often than not judges express their opinion as to what the law is on some aspect not really relevant to the case under consideration. A typical example is where a judge postulates and answers a hypothetical set of facts or cites an analogy. Such an orbiter –dictum is not binding on future courts but may be accorded some respect by subsequent courts dealing with a similar matter depending on the eminence of the judge who said it and the circumstances in which the remark was made.The reason why orbiter-dicta is not binding on future courts is that the point in question (i.e. the subject of the dicta) may not have been properly argued and evaluated with the result that its full implications may not have been fully appreciated.

(g) DistinguishingA court may avoid be bound by a previous decision if it distinguishes the previous decision from the one it is being faced with.To do this the court must make a finding that the facts of the present case are so different from those in the previous case that the two decisions are distinguishable. In other words the case before the court will not fall within the ratio – decidendi of the earlier decision hence the need to distinguish it although there may be similarities.4 Sources of Insurance LawThe insurance law in Zimbabwe is heavily influenced by English law. The Insurance Act Chapter 24:07 is the main legislation dealing with issues of procedure in the conduct of insurance business in Zimbabwe.5 The structure of the law courts

(a) Local courtsCourts in this country are divided into inferior courts and superior courts

The following inferior courts operate under the Customary Law and Local Courts Act.- Primary Courts- Community Courts

Every primary court is presided over by a Headman or any other person appointed by the Minister of Justice, Legal and Parliamentary Affairs in terms of the Act. On the other hand every community court is presided over by a Chief or any other person appointed by the Minister of Justice, Legal and Parliamentary Affairs in terms of the Act.

Local courts only have jurisdiction involving customary law and amounts claimable must not exceed five hundred dollars. Proceedings in local courts are conducted in a simple and informal manner. Thus in local courts hearsay evidence is largely admissible and legal practitioners are not entitled to appear in these courts on behalf of a party in any case.

Any person dissatisfied with an decision of a primary court may appeal against such decision to the community court within whose area of jurisdiction the primary court is situated. On the other hand any person who is dissatisfied with any decision of a community court may appeal against such decision to a magistrate responsible for the area within which the community court is situated. (b) The Magistrate’s Court

This court is a creature of the Magistrates Court Act. It is presided over by resident magistrates in all the major services centres of the country. Additionally there are circuit courts which service the more remote areas of the country. Magistrates are civil servants who are legally qualified. On initial appointment their jurisdiction is very limited but this increases as the magistrates advances in his career. The stages magistrates go through are as follows:

(a) Criminal jurisdiction1. Junior Magistrate – 12 months imprisonment with or without labour or a fine not exceeding

$1000 in default of payment an appropriate term of imprisonment, provided this does not exceed the maximum of 12 months

2. Senior Magistrate - 24 months imprisonment with labour or a fine not exceeding $2000 in default of payment an appropriate term of imprisonment

3. Provincial Magistrate - 36 months imprisonment with labour or a fine not exceeding $3000 in default of payment an appropriate term of imprisonment

4. Regional – Generally 7 years imprisonment with labour. For armed robbery regional magistrates have special jurisdiction of 10 years. They can also impose a fine of $7000.

(b) Civil jurisdiction of magistrates court

Generally all magistrates have the same jurisdiction. The jurisdiction applies as follows:-

1. They have jurisdiction over any person Criminal jurisdiction who resides, carries on business or is employed within their province.

2. They also have jurisdiction over any partnership whose business premises are situated within the province.

3. Jurisdiction also attaches to the magistrate whew the cause of action arises within the province.

4. if the claim is based on a written acknowledgement of debt (i.e. a liquid document like a cheque) the extent of the jurisdiction is $10 000. In any other claim (i.e. those not based on a liquid document like ejectment claims) the jurisdiction is $5000.

(c) The superior courtsThe establishment of the superior courts namely the High Court and the Supreme Court id provided for in the Constitution of Zimbabwe. Each of these courts has its own enabling Act providing for the jurisdiction and powers bestowed upon them. Judges of the High Court and the Supreme Court are selected from eminent and experienced lawyers, prosecutors, magistrates, law lectures, etc.

(d) The High CourtThe high court is presided over by the Chief Justice, the judge president and such other High Court judges as may be appointed. In civil trials the jurisdiction of the court is unlimited as to persons, causes of action and the amount involved in the dispute.

As regards criminal matters the High Court may pass any sentence permitted by law and it is the only court that may impose the death sentence. In civil matters, cases are usually heard by a single judge. Criminal cases are also normally heard by a single judge with the assistance of two assessors. Assessors are respected members of the community who are not legally trained as such like chiefs whose role is to assist the judge on matters of fact. Matters of law are exclusively for the judge alone to decide on.

(e) The Supreme CourtThe Supreme Court is the highest court in the land. It is presided over by Chief Justice and judges of appeal. A full Supreme Court bench consists of five judges. The Supreme Court is not a court of instance, except in very exceptionally circumstances, and mainly deals with appeals from all the lower courts inclusive of the High Court.The only time the Supreme Court sits as a court of first instance is when it entertains a constitutional matter.It has power to confirm, set aside or vary the judgment of any of any lower court.

Other courts and tribunals- Administrative Courts – e.g. Town Planning Appeal Court for the control and administration

of town planning) - The Rent Board – deals with issues of rents on leased properties and has judicial powers- The Juvenile Courts – their primary function is to safeguard the welfare of children.

Decisions of the juvenile courts are subject to review by the High Court which is the upper guardian of all minors in the country.

- Small Claim Courts – their function is to adjudicate over small civil claims generally not exceeding $ 2000.

Introduction to Law

Concept of Law. Law comprises “a set of rules that regulate human behaviour”. These rules are also called norms – from Latin “norma” a yardstick or rule. In general norms include moral codes, laws of etiquette, fashion, rules for games and sport. Legal norms refer to “the law of the Law Courts” laws of human conduct as dealt with by courts of law.

Definition of Law. “The body of rules which a state or community recognizes as binding on its subjects or members and which determines those person’s rights or duties”. Law pervades virtually all relationships, at the cinema, at a restaurant, at dry cleaners. To different people it also has special meanings- advocate, criminal, doctor, student etc. simple incidents may lead to considerable consequences in law e.g. inadvertence while driving, failure to peruse a document, lack of

foresight in handling a potentially dangerous situation e.g. the celebrated case of Donoghue v Stevenson 1932 AD.

Here a woman purchased and partially consumed a bottle of ginger in a tearoom. On pouring the balance of the drink she saw a decomposing snail. She then sued the manufacturer claiming damages for shock and gastroenteritis. After a number of increasingly expensive legal battles, the case was finally decided in her favour.

[George Findlay KC] “In the dealings of men millions and millions of obligations spring up…some of long duration others of brief currency …. along the street where you might get caught up in a swirl of emergent rights and duties, as pedestrian or motorist, in shops men become buyers and sellers who pay or borrow; …whether they understand their position or have not the slightest glimmering of it.”

Purposes of Law. 1] Preservation of Order. Law would not be required if all people were perfect. Law provides what must or may be done, what may or must not be done, to avoid a clash of rights between individuals and the community. Cicero: - “we are slaves of the law, in order that we may be free”.

2]. Justice. Equivalent to fairness. Principles of justice are universal though the means of enforcement differ from societies, about what is right or what is wrong. Mankind has an innate sense of justice. The more just the law the more likely that it is obeyed. But law and justice are not synonymous. Laws must be fair otherwise they fail to preserve order or peace. In the long run people will rebel against an unjust law.

In general the majority of people obey the law and no compulsion is necessary to obtain obedience as a result of- a] A sense of right or wrong b] Social duty of good citizenship, lack of desire or need to break the law, fear of being caught, stigma of public exposure.

Enforcement is necessary otherwise the law would be held in contempt and fall into disrepute as a “toothless bulldog”. This is done by setting up police force, courts, prisons etc.

Principles of Law. Justitia [the goddess of law] is depicted as blindfolded, holding scales in her left hand and a sword aloft in her right hand.

1 Just Application. Law must “direct what is honourable and forbid what is base”[Voet] Despotic, harsh or stupid laws eventually fall into disuse.

2 Equality. Applying equally to all persons in the same condition. All men are equal in the eyes of the law if they fall into the same class e.g. child, adult, cyclist, motorist, pedestrian etc.

3 Uniformity. Applying to people in all regions of a country.4 Authority. E.g. Parliament or local authority through delegated authority.5 Certainty. Sure anticipation of legal consequences. Rules must be clear and unambiguous.

Laws must be declared and made known before being applied. Post facto legislation is generally avoided. New law is promulgated – made known by publication- through the Govt. Gazette. Thus “ignorantia iuris neminem excusat.” Everyone can get to know the law and thus should know it.

But very few people know more than a few laws apart from common laws e.g. theft, rape etc. If all knew the law there might be no need for a course on law.

Conflict of Principles. Law must adapt to changing circumstances, values and needs of society. However well established principles and stable practices endure.

Elements of Law. 1] Criminal Law-rules formed or recognized by the state which prohibit certain acts on pain of punishment.2] Civil Law- concerns private affairs and the legal rights of persons. In both cases –civil and criminal- the state has power and ability to give effect to court orders. Some unlawful acts may give rise to both criminal and civil proceedings.

A Legal right is defined as “An interest conferred by, and protected by the law, entitling one person to claim that another person or persons either give him something or do an act for him, or refrain from doing an act”-Willie. Morals and laws concern human interests but most morals are not enforced by the state. For a right to be enforced or protected by the law, there must be a legal duty e.g. a drowning child has a legal right to live, but there is no duty on a bystander to rescue him. Rights and duties are defined in extent e.g. the owner of land may cultivate crops, but only if they are not dangerous or erect a house provided bylaws are complied with.

Thus a legal right is a legally protected interest, which imposes a correlative duty on others. An interest includes anything of benefit to man, individually or collectively e.g. an interest in one’s possession, freedom or reputation. A duty is an obligation to perform or forbear from performing some act. Thus a duty can be positive or negative.

Persons. Rights, duties interests attach to persons and do not exist on their own. Persons may be natural or fictitious-artificial or juristic. The law confers capacity to acquire rights and incur duties on fictitious persons e.g. companies can be punished but may not be whipped or imprisoned. Some persons have limited capacity e.g. minors, the insane etc

SOURCES OF LAW.

This concerns historical sources of common law and the formal sources- custom, case law and legislation. Common law is the law common to the country as a whole as distinct from the laws in a locality and it covers-

Laws not originating from legislation and covers rules of law as enunciated by courts. It also includes non-statutory sources-custom, writings of jurists and academic authors. Thus common law covers all sources except statute law.

Most Continental/European systems of law are codified i.e. the law is reduced to writing and contained in one piece of legislation. This is not true of Zimbabwe or SA.

Customary Law includes habits or practices observed by individuals in a society i.e. an unwritten code of behaviour. Social rules of conduct in a community are permissive and are usually observed for social acceptance. Custom is one of the oldest sources of law but today is not very important. It applies in restricted circumstances. Primitive man had to struggle against the elements, wild animals and his own kind. Thus natural laws, habits customs were established “Where an act has for some considerable time been performed in a particular way, a custom exists that the act shall be so performed. Where the state requires obedience to the custom, it is law.” –Montmorency. There is no clear-cut moment when habit becomes law, its gradual and imperceptible. In modern law however custom is no longer a significant source of law. [voetstoets- 'foot-touch' was used in early Roman Dutch law to conclude a sale].

Minor customs or usages occur in commercial relationships. However stages in legal developments include customary law, case law and the legislation. Our common law is based on customary law; some customs have even been incorporated into legislation. Common law includes all law applied in Zimbabwe except statute law. Adultery is no longer a crime since the case of Fitzgerald v Green 1911 EDL 432.

“Until a court of law rules that a custom is law, there is no law”. To establish a custom as law the rules in Van Breda v Jacobs 1921 AD 330 are followed.

“The custom must be reasonable, proved to have been in existence for a long time, generally recognised and observed by the community, certain, clear and consistent with statute law”. It had long been a custom – known as ‘first come first pull’ – among fishermen at False Bay that once nets/lines had been set on a stretch of beech where no boats were permanently stationed, other fishermen were not entitled to poach on the shoal of fish. Held that a custom will be enforced by the courts where it is:

Reasonable Certain long-standing Uniformly observed Consistent with statute law.

Similar considerations hold for ‘trade usage’

Historical development of Our Law. Our common law combines two different legal traditions- Dutch tradition for stating clear principles from Roman and European experience as well as the English tradition to work from case to case.

Roman Law forms the basis of law in most civilised countries today. Our laws have therefore developed over thousands of years..

1 The Monarchy 753 – 509 BC. Romulus founded Rome in 753BC. Tribal law included religious and moral rules. The distinction between law and religion was not clear. The last king was Tarquinuius Superbus.

2 The Republic. 509 -27 BC. The Law of the Twelve Tables was the starting point of Roman legal history. They were produced after studying the laws of Greece following disquiet by plebians that patricians held privileges and so laws were discriminatory. At the time of the 12 Tables the law placed great emphasis on formality e.g. oath which had religious significance as well as solemn rituals for the transfer of property. However these gradually gave way to oral contracts involving oaths. It was the oaths and not the agreement that was binding. Parties were expected to speak the formal words of offer and acceptance in each other’s presence. The Republic ended when Octavian, great nephew of Julius Caesar, defeated by Mark Antony. He took the name Augustus and became the first Emperor.

3 The Empire. -27 BC. Jurists assisted greatly in the development of the law.-Gaius, Papian, Ulpianus. With the fall of the Western Empire in 476 AD, barbarian kings maintained the Roman law. Justinian reduced existing law to a systematic form after making amendments and interpretations and rejecting obsolete laws and then established the Justinian Code- Corpus Iuris Civilis- which was in 4 parts. Constantinople, capital of the Eastern Empire fell in 1453 but most countries retained Roman law in part at least.

Roman-Dutch Law. Romans spent 400 years in the Netherlands. Roman law was grafted gradually to Dutch law by court actions and Dutch writers. Roman law tended to be used where local laws-which had never been reduced to writing- were obscure or non-existent. Thus we talk of the reception of Roman law into Holland-one of seven provinces of The Netherlands. This happened as follows:

Formal reception. Roman law taken over completely by legislation Informal Infiltration-unnoticed. Not openly.

Jurists such as Voet, Grotius, Simon van Leeuwen etc. played an important role in this reception. Hugo de Groot [Grotius] studied law at 11and became an advocate at 16. He is one of the greatest jurists, well known for his views on international law which are cited today on disputes on fishing rights on the world’s oceans. Simon van Leeuwen was the first to use the term “Roman-Dutch” while Johannes Voet is the most quoted of the old writers.

During the Dutch Republic-1581- 1795- The Netherlands was a maritime and colonial nation of prime importance. In 1652 Jan Van Riebeeck landed at the Cape of Good Hope with The Dutch East India

Company. He brought with him the law of Holland. In 1806 the British annexed The Cape. In 1890 the Pioneer Column occupied Mashonaland. On 10 June 1891, The British High Commissioner's Proclamation made the law of The Cape on that day to be the law of Southern Rhodesia. Our law [unless amended by Parliament] is that in force at the Cape in 1891. However Clayden FJ pointed out in CAA v Vickers-Armstrong Ltd, 1956 SA that “a practice, later shown to be erroneous, cannot be regarded as the law in force in 1891; the true law must be looked to.”

At that time [1891] the law at The Cape was an amalgam or hybrid of Roman Dutch and English law. Appeals were to The Cape Supreme Court. The formation of the Union in 1910 strengthened Roman Dutch Law against English Law. Appeals to the Privy Council were abolished in SA in 1950, and in Zimbabwe in1965 after UDI. The Criminal Law and Evidence Act applied the law in force in the Supreme Court of Judicature in England. English law was however applied in Malawi and Zambia. In 1806 and 1828 the Criminal Procedure system was remodeled along English lines and in 1830 the English law of evidence was also formally adopted. However the law of delict, persons and property kept its Roman Dutch bias.

By English common law a gratuitous promise could be enforced only if it was contained in a sealed deed, and even then it had to be part of a bargain where each party gave something-some reciprocal advantage, consideration, a quid pro quo. This was changed in the case Conradie v Roussouw 1919.

The Elizabethan chartered company was an expensive luxury suitable for grand schemes of exploration and colonization. The English Companies Act 1862 has formed the basis of legislation throughout the Commonwealth.

1 Legislation. A statute is the most authoritative source of law in Zimbabwe. Its provisions apply in every court. Most statutes in fact change existing law. Parliament consists of the House of Assembly and the Senate. Legislative power is vested in the Legislature i.e. the President and Parliament. The Legislature can make whatever law it considers necessary or desirable in the interest of peace, order and good governance by way of statute law. In 1963, 1976 and 1996 all acts in force in Zimbabwe were revised, consolidated and published in separate consecutive volumes with chapter numbers. Detailed administration of each Act is achieved through a Statutory Instrument [SI] This is a form of subsidiary or delegated legislation. All such subsidiary legislation must be placed before Parliament. However courts may declare such legislation invalid on grounds of being ultra vires the enabling Act.

Limitations on Legislation- Applies to one country. Section 52 of the Constitution restricts amendments and

Section 24 entrusts enforcement of The Declaration of Rights to the Supreme Court. By Sect 50 Parliament makes law “for the peace, order and good governance of Zimbabwe.”

Courts interpret the inexact words of statute. Ultra Vires rule for Subsidiary Legislation applies where-o Subsidiary legislation goes further than the parent Act allowso It conflicts with or is repugnant to legislationo Delegated power has been used for purposes not provided for in the Act.o It is unreasonable.

Constitution of Zimbabwe Amendment Act –No. 17 of 2004. Sect 31 F: Vote of confidence- “two thirds of all the members of each house” Sect 32 “the legislative authority of Zimbabwe rests in the legislature which shall consist

of the President and Parliament. Sect 34 composition of the Senate-66 members.

5 x 10 provinces 50

President, D-President, Council of Chiefs 28 chiefs x rural provinces 86 members appointed by the President 6

Sect33 “parliament consists of the two houses, called the Senate and the House of Assembly” The Senate has no power to amend a money bill but many recommend amendments to the

House of Assembly. Disagreement between the two houses-Sch 4(3)- If Senate rejects a bill or amendment; the bill

may be presented for Presidential assent “in the form in which it was passed by the House of Assembly”. In addition where there is a certificate of urgency the bill may proceed for Presidential assent in the form in which it was passed by the House of Assembly.

Precedent/Case Law. This covers previous case referred to as an example. A previous judiciary decision serving as a guide or rule for similar cases. A ruling concerning the legal position applicable in a particular set of circumstances becomes the law – stare decisis et non quieta movere. Precedent is found in all developed legal systems because the law must be certain and must benefit from the wisdom of forebears. Decisions of a superior court of record are reported in Law Reports. It is the reason or principle that must be followed i.e. ratio decidendi. Obiter dicta are statements said in passing and are therefore not binding.

Judges interpret and apply law as it exists but do not seek to make the law. Precedent is used in a novel situation where no legal rules exist. The case is then decided on the basis of legal principles of justice.

The courts make use of the doctrine of precedent to assist in handling the volume of cases that are recorded in the law reports. Thus previous decision serves as a guide for similar cases. Precedent is found in all developed legal systems. The object of the law reports – which in England date from the 13 th century, was expressed by Counsel who said to the judge: “I think you will do as others have done in the same case, or else we do not know what the law is.”

In passing judgement, a judge gives his reasons by setting out the facts of the case and the law applicable to it. So another judge is able to extract the essential reason for the decision; the ratio decidendi as opposed to observations on the law that were not essential to the decision – obiter dicta [statements made in passing]. The ratio decidendi, if made by a higher court becomes the law.

Precedents save the profession and the courts from being overwhelmed by the sheer volume of the cases. They also allow for certainty and predictability. As far as possible the law should be predictable and certain; where two judges consider the same question of law in separate cases, it is desirable that they reach the same decision.

The practice of following decisions of a higher court is known as judicial precedent- stare decisis et non quieta movere [to stand by what has been decided]. The judge must distinguish between ratio decidendi and obiter dicta [whether a matter is directly in issue or is merely incidental. Obiter dicta may be used for guidance, but it is not binding; it is merely persuasive, it is not authoritative.

Advantages Consistency. Law not subject to whim. Certainty/predictability. Christie: “If the law becomes unpredictable it is not serving its

purpose.” [Christie] Flexibility. Law can be created without waiting for legislation.

Disadvantages Uncertainty due to the large number of cases that can be reported or referred to. Fixity resulting in injustice being perpetrated Unconstitutionality. Judges are then seen as making law instead of merely applying it

Bias arising from judges especially under conditions of rapid change Reform may be stifled.

Searching for precedent starts at home and spreads outwards.

Authoritative [Binding] Sources Legislation by a competent body

Constitution of Zimbabwe Sect 3: “This constitution is the supreme law of Zimbabwe and if any other law is inconsistent with this Constitution that other law shall, to the extent of the inconsistency, be void.”

Parliamentary legislation Delegated legislation

Decisions of a higher/superior court in accordance with ranking of the courts. Traditional Customary Law General Custom or trade usage Original Roman-Dutch law Roman law and commentators

Persuasive Sources. Precedent does not prevent a court from arriving at a different decision/conclusion. However if the reasoning of is convincing, the court will be influenced by the source.

South African judicial decisions are geld in the greatest respect English judicial decisions African American Continental/European Acknowledged textbooks are often referred to Principle- where all the above fail, the court decides the matter on principle to make

what it deems the fairest decision.

The Supreme Court is not bound by its own decisions or those of its predecessors or of any other court. However those previous decisions will be regarded as binding unless departure is in the interests of the development of law. Such departure occurs only after “the most anxious deliberations”.

The main function of the Supreme Court is to hear appeals from other courts and tribunals as sit is the final court of appeal. The High Court is bound by decisions of the High Court and the Supreme Court.

DIVISIONS OF THE LAW

Various divisions of the law are governed by different principles. In solving a legal problem it is important to identify the category into which it falls – hence the rights of the parties. Two major categories are public and private law.

Public Law refers to the laws regulating rights where one party is the state. In private law both parties are private persons. Public law affects the interests of the public or the welfare of the state while private law private law effects the interests of individual citizens. The state is an artificial person consisting of a community of people living together in a particular territory under a common authority. It is like a corporation, it is a legal entity distinct from its members. Like the corporation it acts through its organs e.g. President, ministries, depts. etc. Public law may involve public organs among themselves.

(a) Constitutional Law. The constitution collects rules for the framework or machinery of the state, fixes distribution of power, functions of Govt. and how these are exercised. Over 200 years ago the French writer Montesquieu divided all Government into three arms-

Legislative power allows for law making.

Judiciary enables courts to decide dispute Executive administers branches to put law into effect and execute orders and sentences of the

judiciary.

The constitution grants wide powers and constitutional law regulates their use.

(b) Administrative Law. Whereas Constitutional Law deals with the structure of Govt., the details of governmental functions are located in administrative law. The difference is one of degree rather than kind. It covers the organs, powers and duties of administrative authorities. Boards e.g. Rent, Censorship. Such bodies are constituted by and operated in terms of specific legislation.

(c) Criminal Law. “A crime is an unlawful action, accompanied by a blameworthy state of mind, which is punishable by the state”. Accused are prosecuted in criminal courts and may be punished by fine, imprisonment, whipping or death. If proceedings aim to punish the wrongdoer, they are criminal. Civil proceedings aim to compensate the injured party.

The state establishes itself as the ultimate authority in a defined territory and assumes responsibility for maintaining order. Crimes are acts, which threaten this order. They are seen as wrongs against the state even though a private individual is the immediate victim. Private revenge would further upset order or peace in the state. Nobody is allowed to take the law into his own hands. Civil wrongs do not pose such an immediate danger or threat to peace in society. Hence the parties are left to pursue their own remedies.

There are two sources of criminal law- Common law crimes have been so regarded from time immemorial e.g. rape, murder etc. Statutory crimes are created by legislation

.The essential features of a crime include-

Failure by a wrongdoer to observe a legal duty. There must be an action by the Accused. No one may be punished for his thoughts only. Without some positive act there is no crime, even an attempted crime.

The wrongful act must be voluntary. So a sleepwalker or someone in an epileptic fit would not be punished. This voluntary act is called actus reus.

State of mind-mens rea- is criminal intention. The act must be accompanied by a guilty state of mind. All common law crimes require mens rea. Thus taking an umbrella in the honest belief it is mine is no crime. Mens rea is not always necessary for statutory crimes. Liability here is strict. Law considers any child under 7 too immature mentally to have a blameworthy state of mind and so cannot commit a crime. For older children mens rea must be satisfactorily established and so child under 14 is presumed not to have mens rea.

An insane person while mentally deranged is devoid of reason. Like infants he is presumed not to know the nature and quality of his acts, or tell right from wrong-except during a lucid interval. Crime and offence are interchangeable words in law though not in ordinary speech.

Private Law. The bulk of our law falls into this category. This category covers law of property, persons, succession and contract.

Law of persons. Including Family Law covers- Rules which describe various classes of persons with limited legal capacity How legal persons are created and cease to exist and their division into different classes.

Family law i.e. domestic relations. Formation, dissolution of marriage, its legal consequences, law of parent and child, guardianship and legitimacy.

Marriage –Chap 5-. “Marriage is a contract between a man and a woman to live together as man and wife to the exclusion of all other men and women”. It is a special kind of contract-sui generis. It may not be dissolved by the mere consent of the parties, though otherwise constituted through their consent and confirmed by legal solemnities.

Invariable Consequences. Parties must live together and afford each other sexual privileges.Owe each other a duty of mutual support.

Variable Consequences.Roman Dutch Law grants man marital power i.e. guardianship of his wife, power to alienate or encumber her property as he pleases. Community of property between husband and wife- pooling their property into a common estate. In Zimbabwe the marital power was abolished by The Married Persons Property Act 1929.

Death or divorce terminate marriage. Divorce is granted when one of the fundamental requirements of the marriage contract is broken.

LAW OF PROPERTY

This is part of private law, it is also called the law of things. It grants a real right i.e. power and control over the thing-tangible-corporeal or intangible-incorporeal. Movables can be moved without injury to themselves. Immovables include land, buildings or corporals, and servitudes or leases on immovables-incorporeals. Movables include corporeals e.g. a pencil, as well as mortgages or personal rights of action-incorporeals.

Ownership of a movable is transferred by delivery. An immovable is transferred by registration in an official record by a state authority. Full ownership is the right to possess, use, enjoy fruits, dispose or destroy. A servitude is ‘a real right enjoyed by one person over or in respect of the property of another, the latter is required to suffer the former to do, or himself to abstain from doing something upon such property for the former’s advantage’. The holder of a servitude has the right to use or enjoy another’s property in some way. A usufruct gives the right to use or enjoy another’s property but not alter its character. “I leave my farm to my son subject to a life usufruct in favour of my wife”. A real or praedial- servitude e.g. one entitling ‘dry’ property to draw water from ‘wet’ neighbour. The right of way or right of driving cattle. A mortgage is “a right which one person has over the property of another which serves to secure an obligation” one person is thus entitled to hold the property of another pending payment of a debt.

Law of Obligations. A real right is one that the law will sustain against anyone and everyone ie against the whole world. The law of obligations covers personal rights only- rights against specific persons. If one person is entitled, the other is obliged. Obligations arise principally by contract or delict.

Law of Contract. This branch of law affects the ordinary person more frequently, sometimes without even being aware of it.

Law of Delict. ie Delictum/wrong. Everyone has a right to his property or reputation. A delict is a form of unlawful conduct which causes harm to another person. However the state is not represented. Delict is based on fault. The wronged party seeks damages for injury done to him. His loss is of two kinds:

Patrimonial damages i.e. measured compensation for established monetary loss Sentimental damages- estimate compensation for contumelia i.e. culpable infringement of an

aspect of personality.Patrimonial loss is therefore actual loss suffered and damages are calculated to place the injured party in the position he would have been in had the not been wronged [Actio legis Aquiliae]. Claims for sentimental loss are brought through Actio Injuriarum eg for defamation.

Example: A being a passenger in a taxi, is injured when the driver is involved in an accident because he was looking at a pretty girl. Here there is a crime, a delict and breach of contract.It is a private or civil wrong and the action is wholly compensatory. There is wrong which causes pecuniary loss and wrong through insulting another. Aquilian action and Actio injuriarum-action for insult.

The reasonable man-man in the street- “an ordinary prudent right-thinking person” “Some are by nature unduly timorous and imagine every path best with lions. Others, of a more robust temperament, fail to foresee or nonchalantly disregard even the most obvious dangers. The reasonable man is presumed to be free both from over-apprehension and from overconfidence”

International Law. Regulates the relationship of one state, as Public International law, or as Private International law, sets jurisdiction over private individuals where the laws of 2/more states overlap e.g. where an Englishman domiciled in England comes to live in Zimbabwe and marries a Zimbabwean girl.

Estoppel. This doctrine requires all of the following- Representation by one party through words or conduct or even inaction that a

certain state of affairs exists. Such representation was of such a nature as to mislead a reasonable person who

developed a reliance on that representation. The person who holds that reasonable reliance acted on the faith of it or was

induced by it The party relying on it suffered actual or potential prejudice. The prejudice must

have resulted from the reliance.The rules of estoppel appear in many areas of law e.g. contract, agency. If one person willfully or negligently through words, conduct/deed induces a belief that a certain state of affairs exists to the prejudice of the latter, the former will not be allowed to deny the truth of that belief. Thus estoppel is used as a defence.

Example- If A sells a car to B which car in fact belongs to C, C will be estopped from claiming the car from A if by his action he leads B to believe A owned the car.

Under normal circumstances, the claim would have succeeded. However by his past conduct his claim will be unsuccessful. In the law of contract a contract exists if the parties have reached agreement i.e. ad idem. If one party leads another reasonably to believe that they are in agreement the other i.e. the blameworthy party is precluded from denying that agreement exists if the other has acted to his prejudice.

LAW OF AGENCY: PRINCIPLES AND OPERATION1. Relationship of principal and agentAn agent is a person who acts on behalf on another, known as the principal.The agent enters into binding contracts with other persons (third parties) on behalf of the principal. The agent is simply a mechanism through which the principal acts. The legal principle is expressed as ‘qui facit per alium facit per se’ (he who does something through another does it himself)The agent is not personally bound and drops out once the agreement between the principal and the third party has been reached.1.1 Formation of the relationship

An agency agreement can be written or oral or implied from conduct or relationship. The agency agreement must be in the form of a deed if the agent is given express authority to execute deeds for his principal.Existence of express terms of the agreement which directly or by implication refers to the agent as receiving remuneration makes the relationship contractual. Many agents act without any remuneration i.e out of gratitude or friendship (gratuitous agents). In these circumstances the agent will owe the principal all the duties normally owed to a principal.Every employee is an agent of his employer in the course of his work. A dishonest employee prejudices his own position in terms of the employer/employee relationship but the principal can be bound by the misconduct of his employees. Agents are not employees but independent contractors, with a contract for services rather than of service.2. Types of agent2.1 Universal agent This agent is appointed to handle all the affairs of his principal and has unlimited authority to act for the principal in any capacity.2.2 General agentThis agent has authority to represent his principal in the business of a particular kind, e.g. to manage a shop. The principal will be liable of acts done by the agent within the scope of usual authority unless he has expressly forbidden such acts and given notice to third parties likely to be affected.In Watteau v. Fenwick (1893) owners of a public house had appointed a manager to manage the pub for them. The manager’s name appeared on the door as licensee of the premises. The owners and the manager had an express agreement which restricted the manager to the purchase of bottled ale and mineral waters only. Despite the limitation, the manager bought cigars for resale from a supplier who was unaware of restriction. The supplier sued the owner for payment and the court held that he could succeed and recover the price as the action of the manager was within his usual authority.Third parties are entitled to assume that the general agent’s actual authority and his usual (customary) authority are one and the same.

2.3 Special agentThis agent has authority to act only on a particular occasion e.g. buy a particular article for the principal.2.4 Del credere agentThis agent undertakes responsibility for the performance of contracts by people whom he introduces to the principal e.g. a commission agent who agrees to guard his principal against loss from sales on credit.2.5 Mercantile agentThis agent has authority in the course of business as agents to sell, consign goods for sale, buy goods or raise money on the security of the goods.2.6 Commercial agentsThese are self employed intermediaries who have a continuing authority to negotiate the sale or purchase of goods on behalf on the principal.The agent must be paid commission on repeat order even where the agent was not responsible for the order. The agent must receive commission on business introduced even after termination of the agency contract. The agent must be paid his commission even when the contract does not follow from the lead e.g. when the principal is to blame for the failure of fulfillment of the contract.

3. Appointment of agentsThe agency relationship arises as follows:3.1 Express agentThe appointment is effective and positive and the agent has authority to act in accordance with the express terms of the agency agreement. If the ambit of authority is ambiguous the agent is under duty to seek clarification from the principal.3.2 Implied agentAgency by implication is derived from the express grant of authority, e.g

(a) Reference to past course of dealings – agency arising from an implied term that such dealings are to be authorized by the principal. In Murfitt v.Royal Insurance Co (1922) an agent was requested to arrange insurance cover on fruit trees and crops in an orchard. The agent advised that the property would be covered while he submitted the proposal to the company. The company, however, rejected the proposal and in the meantime a fire had taken place. The agent had no express authority to give verbal cover, but there was overwhelming evidence that he had been doing that in the district for over two years.

Past course of dealing with an agency was therefore implied and the insurance company had to meet the claim. (b) Reference to specific law and practiceAgency relationships are implied by reference to Acts of Parliament, past precedents, the established methods of conducting business in a trade or profession or a combination of the three e.g. under law of partnership each partner is the implied general agent of the firm and in banking where each bank has an implied authority to be the customer’s agent for the purpose of collecting cheques for the credit of his account. (c) Wife as implied agentAn agency is implied in favour of the wife living with her husband, she is entitled to pledge her husband’s credit for the purchase of necessaries suitable to their style of leaving. This implied agency would extend to a woman living with a man in a stable relationship other than marriage.

However, the implied agency in favour of the wife can be rebutted by proving:- express warning to supplier to discontinue the supply of goods on credit to the wife; or- the wife was already adequately supplied with goods; or- the wife had an adequate cash allowance to cover necessaries without the need for credit; or - the wife had been expressly prohibited the husband’s credit and the supplier had been notified

accordingly.3.3 Agency by estoppelEstoppel is a rule of evidence whereby a party is precluded or prevented from denying the existence of some of facts which he has previously asserted. The third party must demonstrate that he altered his position in reliance to the representation that a person is the principal’s agent e.g. a man who has prohibited his wife from pledging his credit but not notified the supplier accordingly may be estopped from denying the wife’s implied agency.Estoppel operates when the principal has acted in such a way as to create the impression of an agency agreement and where it would create injustice to third parties for the principal to be able to escape responsibility.3.4 Agency by ratificationIf an agent acts without authority, a principal who would not otherwise be bound by the agent’s action may adopt the contract by ratification. Ratification gives the contract status of an act done with actual authority with effect from the date of dealing with the agent. Ratification thus has retrospective effect.For ratification to be effective the following must exist: 3.1 Contract must not be voidIt is essential that the principal must be shown to have been in existence and capable of contracting at the time of contracting at the time the agent purported to contract for him.In Ashbury Railway Carriages v.Riche (1875) a company was formed to build railway carriages. The directors entered into a contract to construct a railway in Belgium, a contract which was ultra vires. The company could not ratify the contract as at the time the contract was made it lacked the necessary legal capacity.3.2 Ratification must be within reasonable timeUndue delay in ratifying a contract will render the purported ratification ineffective.3.3 Act must still be possibleA principal can only ratify an agent’s action if such action is still possible at the time of ratification e.g. a contract of insurance cannot be ratified after a loss.

In Grover and Grover Ltd v. Mathews (1910) an intermediary without any instructions from the insured renewed the policy of piano manufacturers which had expired a few days before a fire at the premises. Ratification was ineffective.However, the decision in that case was criticized. Canadian and American courts have subsequently permitted ratification after a loss. The Marine Insurance Act 1906 section 86 allows for the ratification of marine insurance contracts after a loss.3.4 Awareness of material factsAt the time of ratification, the principal must be aware of all the material facts unless he has shown himself willing to ratify whatever may be the surrounding facts.3.5 Undisclosed principalAn undisclosed principal cannot ratify. Ratification will only be permitted where it has been declared openly that the relevant contract has been made on behalf of the person seeking to ratify. The agent need not name his principal but he must supply sufficient information to allow him to be identified.3.6 Methods of ratifyingRatification can be oral or written. A principal may not both ratify the beneficial aspects of a transaction and at the same time repudiate those parts which are not beneficial.4. Agency of necessityThis type of agency really arose out of maritime law and practice in the days when limited systems of communication made it impossible to contact the principal in England when the shipmaster was at sea or in distant foreign port.An agency of necessity may arise if an agent is compelled by some emergency to exceed his authority. Agency of necessity is an extension of any existing agency relationship.4.1 Features necessary for agency of necessity:

(a) There must be a pre-existing agency relationship.(b) It must have been impossible for the agent to communicate with the principal.(c) The agent must show that he acted in what he believed to be the principal’s best interests.(d) The situation called for immediate action to protect the principal’s goods or property. It must be

really be an emergency situation.In Great Northern Railway Co. v. Swaffield (1874). The defendant arranged for a horse to be sent by rail to a station 15 miles from where lived. He was to collect it from the station. It arrived at 10:00pm and there was nobody to collect it. The station master who did not know the defendant’s address arranged for the horse to be kept at nearby stable overnightThe defendant refused to pay the expense incurred. It was held that there was an agency of necessity and he had to pay the charges. There was an emergency situation as the horse was ‘perishable’ and the stationmaster had acted in Swaffield’s best interest to preserve his property.

5. Authority of an agentThe powers of the agent arise from the following:

(a) Express authority – where the principal gives express instructions to his agent(b) Implied or usual authority – where it is implied from the conduct of the parties and the

circumstances of the case(c) Apparent or ostensible authority -which is the authority the agent appears to others to have

as a result of some representation or conduct by the principal intended to be acted by the third party. 6. Duties owed by agent to principal

The agent owes his principal the following duties:6.1 ObedienceThe agent must obey his principal’s instructions and if he fails to execute the agency contract he will be liable in damages and will be unable to claim any remuneration.In Turpin v.Bilton (1843), an insurance broker agreed, for a consideration, to arrange for the insurance of the plaintiff’s ship. He failed to do so, the ship was lost and he was held liable in damages to the plaintiff.An agent is also required to exercise discretion in accordance with the duty of obedience.6.2 Personal performance

An agent must perform the duties imposed on him by the agency and is not entitled to delegate the duties to someone else. He is required to delegate a task which is purely mechanical which does not require judgment or discretion.Improper delegation makes the agent liable to the principal for breach of duty.ExceptionsThe agent can delegate his duties in the following circumstances:

(a) where a principal expressly authorizes the agent to delegate(b) where custom or trade usage sanctions delegation(c) where delegation is necessary to ensure proper performance(d) where the work delegated is purely clerical (e.g., signing letters)(e) where unforeseen emergencies arise which impose upon the agent the necessity of

employing a substitute (e.g. serious illness)6.3 To exercise due care and skillAn agent must show skill and diligence in doing his work. If the agent breaches this duty the principal can sue for damages.6.4 To act in good faithAn agent stands in a fiduciary relationship with his principal and must not use his position for his own benefit.This duty can be considered as follows:

(a) Conflict of interestAn agent must not let his personal interest to conflict with his business interest. In Swale v Ipswich Tannery Co (1906), the plaintiff was employed as a fulltime manager. His duties, among other things, was to advise the defendant on its insurance arrangements.He accepted an agency from an insurance company without the knowledge of the defendant and received commission for that. The court held that the misconduct amounted to conflict of interest and justified instant dismissal.The agent acts as the tool of the principal and must always act in the principal’s best interests. He must not act for his own benefit unless he makes a full disclosure to the principal and receives permission to do so.An agent appointed to sell property cannot sell to himself or if appointed to buy property cannot buy from himself without the consent of the principal.(b) Secret profitsAn agent acting on behalf of the principal is not entitled to profit by carrying out those transactions unless he has made full disclosure of the true position to the principal and has received permission to do so.Any secret profit made is recoverable by the principal. For example, if an agent receives money due to a principal a fortnight early and invests it during that time and earns interest, such interest will amount to a secret profit and will have to be handed over to the principal.Bribes and double commission amount to secret profits. A bribe is an amount of money paid to an agent so that he may exercise his agency powers in a particular way.The principal who discovers that his agent has accepted a bribe can:- recover the bribe from the agent- dismiss the agent without notice and without commission- sue the agent and the third party for conspiracy to defraud- exercise the right to set aside the contract made with third partyAn agent is not permitted to receive commission from both his principal and the third party unless he has made full disclosure and consent has been granted.

Confidential informationAn agent may not use confidential information which he has acquired in his capacity as agent for his personal benefit or the benefit of a third party. This duty may continue after the termination of the agency.

6.5 Accountability

An agent must account to his principal for all money he receives on his behalf and must keep a proper record of all transactions. He must keep the agency money separate from his own.7. Duties owed by principal to agent7.1 RemunerationThe agent has a right to the remuneration agreed by his principal or to a reasonable remuneration as is customary in the particular business or is appropriate to the particular circumstances. Remuneration usually consists of commission and to earn it he must prove that he was the effective cause of the transaction.7.2 IndemnityThe agent must be compensated for all expenses or loss incurred in acting on behalf of the principal. An agent cannot claim indemnity in respect of unauthorized actions unless they are subsequently ratified. He has no rights for losses caused by his default or negligence.7.3 Liability for breach of duty

(a) Breach by principalThe agent can take legal action to recover any money he is owed by the principal. He also has the right to refuse to continue to act.The agent can in respect of the money he is owed hold on to any goods he holds on behalf of the principal i.e. exercise a lien over the goods.(b) Breach by agentThe principal has a right to terminate the agency if an agent is in breach of his obligations. The principal may also sue the agent for breach of contract. If agency agreement is terminated on the grounds of fraud, the agent will lose the right to remuneration and there will be the possibility of prosecution under Prevention of Corruption Act.

8. Relationship of principal and agent to third parties8.1 Agent contracting for disclosed principalIf the agent acts outside his actual, implied, ostensible or presumed authority, no contract will be created between the principal and the third party unless the disclosed principal ratifies the agent’s unauthorized acts.8.2 Agent acting for undisclosed principalIn this case a contract is made with a person who, although really an agent, is not known to be such at the time of the contract. The principal is treated as undisclosed unless the third party has actual notice of his existence.The undisclosed principal and the agent are bound by the contract and can enforce it. The undisclosed principal will not be able to enforce a contract:

- where the agent has expressly described himself as principal- where the agent made the contract without authority- where the third party contracted with the agent because of reasons personal to the agent- where to admit evidence of the existence of a principal would be in conflict with the terms of the

contract8.2.1 Personal liability of agent

If an agent fails to disclose that he is acting for an undisclosed principal he can be held personally liable by the third party.In Sika Contracts Ltd v. Gill and Others (1978) a chartered civil engineer acting for a principal made a contract with a building contract and did not disclose this fact until sometime after the contract had been concluded. He had signed his letters ‘BL Gill BE, MICE, Chartered Civil Engineer’ although the court agreed that he was acting in a professional capacity, he was also personally liable to the plaintiffs.8.2.2 Third party’s right to electWhere the agent contracts for an undisclosed principal both agent principal are bound. However, when the name of the principal is disclosed the third party may elect within reasonable time the party whom (agent or principal) he is looking to for the discharge of obligations under the contract.The contract cannot be enforced against another defendant at a later date. If he elects to proceed against the agent then the principal is discharged.

8.3 Misrepresentation by agentIf the unauthorized acts of an agent are not ratified by the principal the agent becomes liable to an action by the third party for breach of warranty of implied authority. The agent can be sued for fraud if he has been fraudulently misrepresenting his authority.8.4 Principal’s liability for the torts of his agentA principal is liable for the torts committed by his agent when acting within the scope of his express, implied or ostensible authority and liabilities extends to torts which he later ratifies. This is akin to the vicarious liability of an employer for the torts of his employees acting within the course of their employment. 8.5 Payment via agentThe principal remains liable to the third party for payment made through his agent which the agent fails to pass on by reason of fraud or bankruptcy.8.6 Breach of warranty of authorityAnyone claiming to be an agent is deemed to warrant that he has authority to do so. If it is later discovered that he had no such authority, he can be sued for breach of warranty of authority.9. Termination of agency9.1 Termination by act of the parties

(a) Mutual consentThe agent and principal may mutually agree to terminate the agency agreement.(b) Revocation by principalThe principal can revoke the agency before performance is complete but may be sued for damages if the revocation is in breach of the agency contract.(c) Renunciation by agentThe agent can resign from the agreement before the agency has been completely performed and may be sued by the principal for damages if the renunciation is in breach of the contract.(d) BreachIf either principal or agent breaches the agency contract in a way that would amount to a breach of conditions the other party may treat the contract as discharged.(e) Commercial agentsIf the contract for a commercial agent is terminated, the agent is entitled to commission for business he has introduced, repeat orders and renewal commission. 9.2 Termination by operation of the law(a) Personal incapacityDeath or insanity of either principal or agent will terminate the agency agreement.Bankruptcy of the principal terminates the agency contract.(b) Destruction of subject matterDestruction of the subject matter of the agency will terminate the agency contract e.g. if an agent is instructed to sell a ship but the ship is destroyed before the sale is effected.(c) Supervening illegalityThe agency will be terminated where performance of the acts required to give effect to the agency becomes illegal e.g. a principal becoming an enemy alien on the outbreak of war.(d) Effluxion of timeIf agency is for a fixed period, the contract terminates at the end of that period.9.3 Exceptions to rules of terminationAgency coupled with an interest cannot be terminated i.e. the agent has been authorised to act as such in order that he should obtain some benefit for himself) 9.4 Effects of terminationIf a principal in breach of contract terminates the agency he may be liable to pay agent damages for breach. If an agent who declines to perform his obligations under the contract may be liable in damages to his principal.(a) Rights of actionBenefits already earned or obtained under the terms of the agreement are not destroyed by termination. The agent may lose these benefits where he is found to have committed acts of fraud

against the principal. Commercial agents are entitled to commission after the termination of the agency contract if the transaction is mainly attributable to the agent’s efforts during the contract.

INSURANCE LAW IRM 102Performance And Remedies

1. Discharge of a contract

A contract may be discharged by:-

- performance- breach- frustration- agreement- operation of law

1.1 Performance

A contract is performed when each party has carried his side of the bargain. e.g. a seller of goods delivering the agreed type and quality and the buyer accepting and paying for them.(a) Duty to performEach party must do completely and exactly what he has agreed to do. Doing anything different will amount to a breach.(b) Time for performanceThe time of performance must be agreed in the contract. (c) Method of performanceThe parties must comply with the terms of the contract as to the method and place of performance as well as its time.If one offers to perform but is prevented by the other party, the offer for performance is good defence in any subsequent action brought by the other party e.g. if performance involves delivery of goods by the seller, rejection of delivery by buyer may release seller from liability under contract.1.2 BreachBreach may take the following forms:(a) Breach by failure to performThis arises when the other party fails to carry out what he has agreed to do. His performance may be defective or may provide no performance at all e.g. a seller may deliver goods which are not in accordance with the agreement or simply fail to anything.(b) Anticipatory breachBefore performance under the contract is due, one party may indicate that he will not fulfill his part of the bargain. This may express or implied from his actions e.g. a seller who has contracted to deliver

goods selling the goods to someone else before the date of delivery. In the case the right to sue for breach arises at once.The injured party may alternately ignore the breach and keep the contract alive until the time for performance arrives. This is worthwhile where there is a chance that the other party may perform his obligations. In doing so, he runs the risk of losing his right to sue if the contract is subsequently discharged by some unexpected turn of events e.g. outbreak of war with enemy country.(c) Effects of breachA breach of warranty gives the injured party a right to claim damages. A breach of condition gives the injured party to avoid the contract and bring it to an end.Breach of warranty in insurance allows the insurers to avoid the contract as a whole.1.3 FrustrationSubsequent events may make a contract impossible to perform. The doctrine of frustration or subsequent impossibility releases both parties from their obligations where events subsequent to the agreement make the contract illegal, impossible or futile. A contract will not be discharged by frustration because it has become more difficult to perform than originally anticipated.Frustration discharges a contract in the following circumstances:-(a) Change in law or operation of law. (b) Destruction of a particular thing necessary for performance of the contract.(c) Non-occurrence of event on which the contract depends.(d) Frustration of the commercial purpose of the contract.(e) Death or personal incapacity.1.3.1 Effects of frustrationFrustration automatically brings a contract to an end and the parties must be restored to their previous position as far as possible.For example:-

- money paid before frustration must be recovered- money payable before frustration ceases to be payable

Frustration does not apply to contracts of insurance as existence of the subject matter is an implied condition of the contract.1.4 Discharge by agreementThe parties to a contract can make a further agreement to release each other from their obligations.(a) Accord and satisfactionWhere one party has performed his obligations the parties can agree that the other party’s performance be in a form different from what was originally required. e.g. offering to pay in kind even if it is a small favour.(b) NovationUnder novation the old agreement is substituted with a new contract.1.5 Discharge by operation of lawA contract may be discharged by the operation of the law e.g.(a) Merger e.g. when a simple contract is replaced by a specialty contract (deed) which includes all

the terms of the previous agreement.(b) Material alteration – arises when one party makes a material alteration to a written contract

without the consent of the other party.(c) Bankruptcy – e.g trustee in bankruptcy may disclaim onerous contracts made by debtor. This

discharges the debtor from his obligations on those contracts.1.6 Discharge of insurance contracts(a) Performance of insurance contractsPerformance by insured involves payment of the premium while performance by insurers involving carrying risks for an agreed period of time and paying any valid claims which may arise.Life assurance contracts are discharged by the payment of the sum assured on death or maturity.In general insurances payment of a claim for a partial loss does not discharge the contract as the subject matter still exists and the contract still has time to run. Where there is a total loss, the

contract will be discharged since the existence of the subject matter is an implied term of an insurance contract.(b) Breach of insurance contractsAn injured party can avoid an insurance contract for breach of warranty, misrepresentation and non-disclosure.(c) Termination of insurance contracts by agreement Some life assurance contracts and all other insurances run for a fixed period of time. Termination of cover once the period has expired is part of the agreement. However, the insurer’s obligations does not cease at the expiry of cover, as liability may still exist for losses which occurred during the period of insurance and are reported sometime afterwards.Parties to an insurance contract may terminate it prematurely if they agree to do so. (d) Return of premiums under insurance contractsOnce the risk has started to run, the insured is not entitled to recover his premium. If the insurers have never been on risk, the insured is entitled to recover his premium because of total failure of consideration.Risk may fail to run in the following cases:-

- proposal may be withdrawn after the premium has been paid- the policy may be void for mistake- the policy may be avoided ab initio for misrepresentation, non-disclosure or breach of

warrantyIn all these cases the insurer must allow a full refund of the premium unless the insured has fraudulently misrepresented or failed to disclose material facts. The insurers may avoid the policy and also keep the premium.Insurers may allow a partial refund of the premium if the policy is cancelled midterm even though the risk has started to run. In this instance required notice must be given.

2. Remedies in contractThe main remedies in the law of contract are:-

- rescission- an action for damages- an action for specific performance- an action for an injunction

2.1 RescissionA contract can be cancelled for misrepresentation or breach.(a) Rescission for misrepresentationMisrepresentation makes a contract voidable at the option of the injured party allowing him to cancel a contract. The injured party is relieved of any obligation to perform and is entitled to recover any property he has transferred. He must also return anything he has received from the other party.The right to rescind will be lost if the parties cannot be restored to their original position or if there is an unreasonable delay on the party seeking rescission.(b) Rescission for breach of contract.Failure to perform a contract properly or failure to perform at all will amount to breach. If the breach is serious, the injured party can rescind the contract.Rescission may be in the following forms:-(a) Refusal of further performance e.g. a buyer refusing to pay for defective goods or an insurer

refusing to pay a claim on breach of contract by the insured.(b) Refusal to accept further performance – e.g. a buyer refusing to accept future deliveries if what

has been delivered so far is not in accordance with the agreement.(c) A claim for restoration of the situation which existed prior to the contract e.g. a buyer who has

paid for goods which prove to be defective and seeks to reject them and asks for a refund.Availability of rescission for breach of contractThe court will take into account the following factors in deciding on whether rescission should be allowed:-

- the express terms of the contract allowing cancellation of the contract if a particular term is broken

- the seriousness of the breach- whether damages would be an adequate remedy- whether it is reasonable for the injured party to accept further performance

2.2 DamagesAn injured party can claim damages when a contract is broken. The central purpose of an award is to place the injured party in the same financial position he would have enjoyed had the contract been performed fully and properly.Substantial damages can be claimed only if the injured party has suffered loss. If the injured party has suffered no loss he is entitled to nominal damages e.g. the other party fails to deliver goods which the injured party subsequently obtains at no extra cost.(a) Types of lossDamages may be awarded for personal injury, damage to property, financial loss and distress or injury to feelings.(b) Measuring the lossThis varies according to the circumstances e.g. 1. Where a seller fails to deliver goods the damages to the buyer will be based on the cost of

substitute goods.2. The cost of remedying the defective performance such as the cost of correcting mechanical faults

in a car or defective carried out by a builder.(c) Remoteness of damageDamages cannot be awarded in respect of losses which are too remote from the original breach of contract. Damages will not be too remote if it is reasonably foreseeable. In Victoria Laundry (Windsor) Ltd v. Newman Industries (1949), a boiler required by a laundry firm was delivered 22 weeks late. The court held that the loss from the delayed delivery of the boiler was foreseeable and the plaintiffs recovered damages for loss of profit from the ordinary use of the boiler.(d) CausationDamages can be recovered where there is a direct causal connection between the breach of the contract and the loss. The defendant will not be liable if the source of loss is not the original breach but some new intervening cause (novus actus interveniens)(e) Mitigation of lossThe victim of breach of contract must minimize his loss and cannot recover losses which he could have avoided e.g. a seller whose customer refuses to accept and pay for goods is expected to try and find a new buyer for them.A person who is wrongfully dismissed from his job must take reasonable steps to find suitable alternative employment.A claimant under an insurance policy must take reasonable steps to protect his property from further loss, ensure that it is repaired in the most economical way or do whatever is possible to keep down the cost.2.3 Specific performance and injunctionsThese remedies are available to the injured party and have the effect of ordering the other party to honour his promise instead of just paying compensation for breaking it.(a) Specific performanceThe court orders the defendant to do something e.g. to transfer property to the plaintiff.(b) InjunctionsThe court forbids the defendant to do something which has agreed not to do e.g. to set up business in competition with the plaintiff. This is called a prohibitory injunction.The court can order the defendant to do something positive to end a wrongful state of affairs which he has brought about e.g. an order requiring the defendant to demolish a structure he has erected in breach of a covenant not to build. This is called a mandatory injunction.2.4 Remedies in insurance law

The above remedies are of little relevance to insurance law. Terms of insurance contracts are framed in such a way that the right to avoid the whole contract is available for breach. The insurers do nothing beyond notifying the insured of their intention to avoid the contract and raise the insured’s own breach as a defence if sued..2.5 Limitation of actionsA victim of a civil wrong has limited time in which to begin action against the wrongdoer. The main limitation periods are:

- six years – in an action on a simple contract- two years where the claim is in respect of personal injuries- twelve years in action on a specialty contract (deed)

When times begin to runThe limitation period is deemed to begin on the date of breach of contract.Duration of normal limitation may be modified by:(a) Fraud or mistakeWhere the existence of a right of action has been fraudulently concealed by the defendant time does not begin to run until the plaintiff has discovered the fraud or mistake. In Lynn v. Bamber (1930) the plaintiff bought plum trees and was given a warranty the trees were “Purple Pershores”. Seven years later he discovered that the trees were not of the correct variety. The court held his action was not statute barred as the defendant had fraudulently misrepresentation.(b) Plaintiffs who are under a disabilityWhere the injured party is under some disability e.g. a minor or of unsound mind, time will only run when the disability ceases.(c) Acknowledgement or part paymentWhere right of action has accrued to recover a debt and the debtor acknowledges the claim by making a part-payment. The limitation begins anew from the date of part-payment.

Discuss what proximate cause is and how it functions. (30)

PROXIMATE CAUSE1. DefinitionProximate cause means the active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source - Pawsey v.Scottish Union and National (1908).In general causation is to be viewed as by the “person in the street’ and by applying common sense standards. E.g. an explosion is to be understood in its everyday meaning and not as an extremely rapid fire as a chemist might view it.An effective and efficient means that there is direct link between the cause and the result, and that the cause is strong enough that in each stage of the events one can logically predict what the next event in the series will be, until the result under consideration takes place.If there are several causes operating, the proximate one will be the dominant or most forceful one operating to bring about the result.2. Train of events

2.1 CausationIn most cases it is fairly obvious what the initial event and last event were. The difficult arises in deciding if there is a direct chain of causation between them or whether some new force has intervened to supersede the initial cause as the event bringing about the ultimate loss.

One way of coming with a decision is to start with the first event in the chain and ask oneself what was logically likely to happen next. If the answer leads one to the second event and this process is repeated until one reaches the final event, then the first event is the proximate cause of the last.If, at some stage in the process, there is no obvious connection between one link in the chain and the next, then there is a break in the chain and something else must be the cause of the loss. Consideration of the following examples will assist in understanding causation.Example 1

A storm blew down the gabble wall of a timber buildingThis falling wall broke electrical wiringThe broken wiring short-circuited and sparkedThe sparks caused a fire in the timber buildingThe fire brigade was calledThey used water hoses to put out the fire and to cool neighbouring buildingsThe water caused damage to the unburnt contents of the timber building and to some neighbouring buildings

There is a direct line of causation between the storm, the collapse of the gable, the fire damage and the water damage.

Example 2A dropped match set fire to rags in a garageFire developed and overheated some acetylene gas cylindersThe cylinders explodedA wall of the garage was blown out and burning materials were blown onto a neighbouring officeThe office caught fire

There is a direct line of causation between the storm, the collapse of the gable, the fire damage and the water damage.Example 3

fire damaged a wall and left it weakenedseveral days later a gale blew the wall down

In Garkarth v. Law Union Insurance Co, (1876) the fire was not the proximate cause of the wall falling. It was the remote cause.

2.2 Remote causeIf damage occurs but there is no imminent likelihood of further loss, the original cause becomes weaker and weaker as the prime cause as time goes by. In practical terms, the possibility of effecting repairs or securing the property from further loss is the important point. If time is too short, the initial cause remains the proximate cause. If there is time but nothing is done the original cause is deemed to be too remote.Example 4

It was wartimeA ship was hit by an enemy torpedoShe was badly holed and in danger of sinkingThe master managed to reach portRepair work startedA storm blew upThe ship was still in danger of sinking and this risk was aggravated by the stormTo save the harbour from being blocked by the ship if she sank, the harbour master ordered her out of portShe succumbed to the storm outside the port

Since the danger of sinking had never been removed, the war was deemed to be the proximate cause. The storm was a remote cause but not the active and efficient cause.

Example 5Fire seriously damaged a buildingA wall was in danger of collapsing onto the building next door

For safety reasons, the local authority ordered demolitionDuring demolition, the wall fell on the neighbouring premises

Since the danger of collapse had never been removed, the fire was deemed to be the proximate cause. The demolition was a remote cause but not the active and efficient cause.

2.3 Concurrent causes3. Concurrent causes and insurance Events A Events B

If events “A” occur concurrently but independently of each other and it is not possible to distinguish which part of the damage was caused by fire and which part by the storm. The damage will be covered since no excepted peril is involved. In events “B” if the damage cannot be separated, none of it is covered since an excepted peril is involved.

4. Nature of the perils relevant to Proximate CausePerils relevant to insurance claims fall into the following categories:

(a) Insured perils:- those named in the policy as insured, e.g fire, lightning and explosion.(b) Excepted or excluded perils:- those stated in the policy as excluded, e.g. riot, war or earthquake.(c) Uninsured or other perils: those not mentioned at all in the policy.Insurers examine every claim carefully in order to ascertain whether the loss was caused by:- a single insured peril (claim may be settled)- a single excluded peril (claim will be rejected)- a single uninsured or other peril (claim may be rejected)- a series of events which may include insured, excluded or other perils (sequence of events must

be studied to establish whether the loss is covered by the policy)if sequence starts with an insured peril and there are no excepted perils in the chain the claim may be settled.If sequence starts with an excepted peril no losses will be covered even if there might be an insured peril later in the chainIf the sequence starts with an insured peril and there is an excepted peril later in the chain of events, losses caused by the insured perils will be covered up to the occurrence of the excepted peril after which no losses will be covered.

If the sequence is broken or interrupted – there is a gap between one event in the chain and the next- it will be treated as two separate chains and each chain will be dealt with as though it were a separate loss.

DAMAGE

Fire

RiotStorm

Fire

For example, even though the sequence may start with an excepted peril the policy may cover losses caused by a subsequent insured peril if this occurs after a break in the chain.

5. Indirect Causes

Wording of some policy exclusions, sometimes exclude a peril if it is caused directly or indirectly by another one, e.g. to exclude death directly or indirectly cased by suicide or war.6. Summary of proximate cause

(a) The insured peril need not be the initial cause.(b) The insured peril must not be a direct result of the operation of an excepted peril (unless the

policy wording specifically overrules this).(c) Damage as the direct result of an insured peril is covered even though the immediate peril

causing that damage is not mentioned in the policy, unless the policy specifically excludes the result, thus water or smoke damage after fire are covered.

(d) Property can be covered even though the named peril does not actually cause damage to the insured property, so long as the named peril operates and its results cause loss to the insured. For example, if a building next door to the insured’s property catches fire and the only damage the insured suffers is by water or smoke, his fire policy will operate (as long the fire was not caused by an excluded peril).

(e) The risk insured must take place. The fear of losing goods by an insured peril is not loss by that peril.

(f) Further damage to the subject matter due to attempts to minimize a loss already taking place is covered. Water damage from sprinklers or firemen’s hoses is covered.

(g) Novus actus interveniens “ a new act intervening” is outside the doctrine. For example, damage t surrounding property by onlookers during a fire. The cause of the damage is the misdemeanor of the crowd and not the fire.

(h) “Last straw” cases. In instances where the original peril has meant that loss was more or less inevitable, the original peril will be the proximate cause even if the last straw comes from another source.

6.1 Summary of examples by class of business

(a) MarineIonides v. Universal Marine Insurance Co. (1863). A captain lost his course and took his ship inshore to try to pick out a lighthouse. Due to hostilities the light went out and the ship ran aground. The hostilities and loss were deemed to be too remote to be the proximate cause.(b) FireHarris v. Poland (1941). In fire insurance, there must also be something on fire which should not be on fire. The insured hid money and jewellery in his fire place and later inadvertently lit a fire. The judge likened the loss to something accidentally falling into the fire and allowed the claim. Fire was the proximate cause.(c) Other propertyWinicofsky v. Army and Navy General Assurance Association Ltd (1919). Where thieves took advantage of a blackout during an air raid, it was held that war was not the proximate cause.(d) Personal accidentEtherington v.Lancashire Ins. Co (1909). The insured fell from his horse and suffered injuries which forced him to lie in cold and damp conditions. As a result he caught pneumonia and died. It was held that the accident was the cause of death and not the disease which was excluded.(e) Liability policiesVandyke v. Fender (1970). Where an employee was injured while a passenger in a car provided by his employer to take him to and from work, he was not injured in the course of his employment since there was no obligation on him to use that method of transport.Gray v. Barr (1971). Gray had an affair with Mrs. Barr. Barr thought one evening that his wife had gone to Gray’s house and went there with a loaded gun. A scuffle broke out during which the gun

went off and Gray was killed. Barr was acquitted of murder and manslaughter. He made a claim on his public liability insurance for a claim against him by Mrs. Gray. It was held that the proximate cause of Gray’s death was his liaison with Mrs. Barr.Barr’s claim failed as the judges agreed that it would be against public policy for him to be indemnified.

7. Proof of lossProof of loss must be produced before any claim is considered and is subject to the following:

7.1 Conditions as to timeInsurers incorporate into their policies provisions stating that the insured must deliver proof of loss in a certain way or within a certain time. This is a condition precedent to recovery. Failure to furnish particulars puts an end to the insurer’s liability and the assured cannot revive his rights by delivering particulars at a later time.The insured must give sufficient particulars i.e the best particulars the assured can reasonably give.7.2 Form of proofThe insured must produce proof of his loss to the satisfaction of the insurers. The proof must be reasonably satisfactory i.e. to enable the insurer to confirm the loss under the circumstances. In life assurance, an insurer will not be compelled to be satisfied by a court order presuming death. On the other hand it has been held that insurer is entitled to call for vouchers, accounts and a builder’s certificate for the value of a house. The proof must be reasonably detailed.

B. LAW OF CONTRACT – CONTENTS OF A CONTRACT

1. IntroductionCertainty of termsThe agreement must fix essential terms of the contract. If an essential term is uncertain, there will be no contract. Scammel v.Ouston (1941) Ouston agreed to buy a van on hire purchase terms. The court held that the agreement was void for uncertainty, since it was not clear what hire purchase terms where contemplated.Minor and meaningless term can be ignored provided the remaining parts of the agreement can still make sense. Nicolene v.Simonds (1953) , the defendant agreed to sell a quantity of steel at £45 per tonne but added the provision that usual conditions of acceptance apply. The phrase was meaningless as there were no usual conditions and the contract remained binding since the essential terms were clear without it.2. Classification of Contract termsTerms of a contract can be classified into express and implied terms2.1 Express termsExpress terms of contract arise from words used (spoken or written) by the parties in reaching or recording their agreement.When an agreement is in writing the parties may be barred introducing other evidence e.g. oral evidence as to what was agreed. This is called parol evidence rule. The only exception to the rule arises when the written contract lacks detail and fails to express the intention of the parties. Oral evidence can be introduced to show the terms of document mean.

A written contract may be in a single document or in two or more documents which refer to each. A motor insurance policy may be contained partly in the policy itself and partly in the certificate of insurance issued in conjunction with it.2.2 Implied termsImplied terms are those which form part of the agreement and are not explicitly stated by the parties. Importing an implied term into the contract is governed by the ‘officious bystander test’Officious bystander ruleIf parties to the contract had been discussing their arrangement and officious bystander had suggested that the term in question be expressly included, would the parties have shouted “Oh, of course” in unison.Is the term so obvious that it goes without saying.Implied terms in insurance contractsInsurance contracts are subject to some implied terms. It is an implied term of insurance that the subject-matter of insurance does exist.It is an implied term of insurance that insurers are not liable to pay losses which are not accidental i.e. those caused by the willful misconduct of the insured.The principle of subrogation is an implied term of insurance. Subrogation is the right of one party having indemnified another under a legal obligation to stand in the place of that person and avail himself of all rights and remedies of that person whether already enforced or not.The principle allows insurers to pursue in the name of the insured any rights and remedies which the insured may have which reduce the loss.3. Standard terms and exemptions clausesContracts are commonly made on standard terms drawn up by one of the parties and are incorporated in printed forms which are used for all customers who seek the same type of good and services.The use of standard terms in commercial practice save times and creates uniformity in day to day transactions.However, the customer has no chance to negotiate individual terms for himself or to influence the content of the written contract presented to him. As a result most customers never read their insurance policies and usually are prejudiced on their claims if the insurer has included exemptions clauses limiting or excluding cover.To avoid abuse inherent in exemption clauses the courts have developed the following rules:3.1 Incorporation of the clause in the contractThe person relying on the exclusion clause must show that it was included in the contract and the other party agreed to it before or at the time the contract was concluded.3.1.1 Signing of documentsIf contract is formed by signing a document, the signer is bound by all terms of the document which he has signed including exemption clauses even if he has not read it.3.1.2 NoticeIf the contract is not in writing, the exemption clause may be incorporated into the contract by a notice displayed in the premises where the contract is made or in a document (such as ticket or receipt). The document may refer to conditions which are found elsewhere.In order to rely on an exemption clause in this case, the party who seeks protection must demonstrate that the document was a contractual one which could be expected to contain terms. He must also prove that he brought the terms of the attention of the other party.In Thompson v. LMS Railway (1930) it was held that a railway ticket which referred to conditions in the railway company’s timetable was a document which could be expected to contain terms. The company had taken reasonable steps to bring them to the attention of the plaintiff.The steps to notify the other party of the terms must be taken before or at the time the contract is made. In Olley v.Marlborough Court Ltd (1949), Olley’s property was stolen when she stayed at the defendant’s hotel. There was a notice in the bedroom advising that the hotel was not liable for such

loss. The court held that the notice was ineffective as she saw it only after the contract was made at the reception desk.3.2 Construction of exemption clausesThe exemption clause must apply to case in question. The guiding principle here is the contra proferentem rule which provides that in case of ambiguity in the clause it will be construed against the party seeking to rely on it. The other party gets the benefit of the doubt.3.4 Fundamental breachThe exemption clause must not exclude a very series breach of contract.Exemption clauses in insurance contractsInsurance contracts contain many exclusion clauses providing that insurers are not liable for losses caused by certain perils or damage to certain types of property or losses arising in various circumstances.Some clauses may limit the extent of an insurer’s liability for certain losses which are covered. The clauses must be incorporated in the contract if the insurers are to rely upon them. A proposer for insurance is deemed to propose for the usual form of policy issued by the insurer for the sort of risk in question and is bound by usual terms and conditions including exclusions it bears. There is no need to specifically draw the insured’s attention, provided they are the usual ones.4. Conditions and warrantiesThe terms of a contract can further be classified into conditions and warranties.4.1 ConditionsThis is a term which relates to an important aspect of the agreement- ‘it goes to the root’. If broken the victim has a right not only to claim damages but also to cancel the contract.4.2 Warranties (In the general law of contract)This is a term which affects only some relatively minor aspect of the agreement. If broken, the injured party has a right to claim damages but not to treat the contract as repudiated.The distinction between conditions and warranties in general of contract is based on the seriousness of the failure to perform an agreement. Parties to a contract may, however, stipulate in advance which terms are to be regarded as crucial and which are not.Conditions and warranties in insurance contracts(a) Warranties

In insurance the words conditions and warranties do not have the same meaning as in the general law of contract.A warranty in insurance in not a minor term of the contract but one of the greatest importance. If broken it allows the insurers to repudiate the contract as a whole. A warranty is a promise made by the insured relating to facts or something he agrees to do. The promise must be literally complied with as an insurer can avoid the policy even if the breach did not cause or have any connection with a loss.A warranty may relate to past or present facts ( i.e. something was so or is so) or it may be a continuing warranty in which the insured promises that a state of affairs will continue to exist or he may continue to do something e.g take safe keys home with him at the end of business everyday.The right to repudiate arises from the date of the breach. The insurer may repudiate the contract ab initio (from the beginning) if the breach of warranty relates to past facts. A proposer for insurance may promise that something is true to the best of his knowledge and belief. This constitutes a warranty of opinion and insurer may only repudiate the contract if the statement was not made in good faith.How warranties are madei. Warranties must be expressly stated in the policy itselfii. Warranties must be impliediii. Warranties may arise from the insured’s answers to questions on the proposal and the

declaration signed at the foot of the form. The declaration normally states that if any answer given to questions to the proposal turns out to be untrue, the policy will be null and void. The signed declaration has an effect of turning all insured’s statements in the proposal into

warranties. In Dawsons Ltd v.Bonnin (1922) the proposer stated incorrectly the address at which his vehicle was garaged in response to a question on the proposal. The court held that a signed declaration stating that the proposal was basis of the contract was enough to turn the statements in the proposal into warranties.

ConditionsIn insurance it is difficult to find anything which corresponds with a warranty in general law of contract, i.e. a minor term which if breached only allows for damages. If the insured breaks part of the agreement, irrespective of how minor it is, it is of little use to insurers. Their main aim will always to avoid paying a possibly a large claim or to rid themselves of the risk entirely.5. Matters which affect the validity of contractsAny defects may destroy the validity of an apparently sound contract or make it partly ineffective. The defects arise from- illegality- improper pressure- mistake- misrepresentation- non-disclosure5.1 IllegalityAlthough in broad terms people can make whatever agreements they wish, contracts which directly involve commission of a legal wrong are generally void in law. Such contracts are illegal. Illegality includes agreements which are against public policy i.e. agreements which do not involve the commission of a legal wrong but which the courts will not enforce because of their tendency to harm public interest.5.1.1 Contracts which are contrary to law Contracts involving the commission of a crime These contracts include e.g. contracts to forge bank notes, steal property, kill or injure another. The making of the contract is forbidden by law e.g. contract to break into a shop – this is criminal conspiracyThe purpose of the contract may be illegal e.g. where a gun is sold legally but the seller knows that the buyer intends to commit murder with it.(a) Other contracts forbidden by lawSome contracts are forbidden by statute but making such contracts is not a criminal act. The contract is illegal but there is no criminal penalty e.g. making an insurance life contract with no insurable interest in the life or event in question.In Harse v. Pearl Life Assurance Co. (1904) Harse took an insurance policy on the life of her mother. The contract was held to be illegal for lack of insurable interest and she could not recover the premiums she had paid.5.1.2 Contracts to public policyThese contracts bring about results that are harmful to the public or socially undesirable.(a) Contracts tending to sexual immoralityContracts for prostitution, furtherance of prostitution or other immoral purposes have been held contrary to good morals and illegal(b) Contracts affecting the freedom of marriage A contract in absolute restraint of marriage (where a person not to marry at all) is void.The law takes the view that arranging marriages should be a business activity. A contract to find a spouse in return for payment is also void.(c) Contracts of trade with an enemyA contract which involves trading in wartime with an enemy is illegal at common law. An enemy is a person voluntarily resident or carrying on business in enemy occupied territory.(d) Contracts to break the law of a friendly foreign stateContracts in this category are harmful to good foreign relations and may be held contrary to public policy.(e) Contracts to deceive public authorities

- For example, an agreement between an employer and employee where part of the salary is concealed or disguised as expenses to defraud the revenue authorities.

(f) Contracts to corrupt public life - for example a contract to bribe officials(g) Contracts that pervert the course of justiceThese include contracts to stifle prosecutions e.g. paying the victim not to report a crime or not to cooperate with prosecution.(h) Contracts to oust the jurisdiction of the courtsA contract which takes away the right contracting parties to bring an action before a court of law is void. It is against public policy to deny people the right to test their claims in court.Arbitration clauses which are common in insurance and other forms of contract and are generally valid. Here, the parties agree in nthe contract to refer any dispute to an independent third party rather than to a court.5.1.3 Contracts in restraint of tradeThese fall under contracts against public policy and need to be treated separately as they form an important group.(a) Restraint on contracts of employmentContracts of employment sometimes provide that the employee, if he terminates his employment, may not compete against his employer by working for a rival firm or setting up a competing business of his own.Courts are not sympathetic to restraints which prevent the employee from earning his living through the use of general or knowledge he has acquired.The courts, however, are more willing to allow the employer to protect himself from the misuse by the employee of trade secrets, confidential information and lists of customers and trade connections.(b) Restraint on the seller of a businessOn the sale of a business, the buyer often require the seller to agree that in future he will not carry on a similar business in competition. The courts are willing to uphold restraints of this sort, for if similar business is established nearby it may attract old customers from the buyer. The buyer among other things pays for the goodwill of the business.(c) Restrictive trading agreementsThese include agreements made by suppliers of goods and services to fix prices, control output, regulate methods of supply or otherwise influence competition and the operation of a free market for their products.The law needs to protect the interest of the public as agreements of this nature harm the public by pushing up prices artificially or causing scarcities.5.1.4 Effects of illegalityThe general rule is that an illegal contract is void and cannot be enforced.Where money or goods have changed hands under an illegal contract, the defendant is in a stronger position than the plaintiff who seeks the help of the court to recover his property since the latter will be denied the help of the court once the illegality of the agreement is discovered.This is expressed in the legal maxim – in pari delicto potior est defendentis(where there is equal wrongdoing the position of the defendant is stronger)The exception to this rule arises when one party entered into a contract through improper pressure, fraud or mistake. The innocent party may recover money or property which has been transferred to the other party.

5.1.5 Illegality and public policy with regard to insuranceMany of the above principles apply to insurance.

(a) an insurance contract may be illegal and void for lack of insurable interest required by law. Harse v.Pearl Life Assurance Co.(1904)

(b) an insurance contract may be illegal or against public policy e.g. an insurance contract with enemies or enemy property.

(c) An insurance policy on property which has been acquired illegally by the policyholder (such as stolen goods) will be illegal.

5.1.5.1 Criminal and other wrongful actsAn insured cannot recover compensation for a loss caused by his own crime-

- Under the basic principle of insurance the insured cannot recover losses caused by his own willful misconduct.

- Public policy prevents him recovering the losses because to do so would encourage others to break the law.

Property InsuranceGeismar v. Sun Alliance (1977).The plaintiff smuggled jewellery into the UK without declaring them and paying the necessary excise duty: this made liable to forfeiture. The jewellery was subsequently stolen and the court held that he could not recover under his insurance as this would allow him to benefit from his criminal act.Life assuranceBeresford v. Royal Insurance Co.Ltd (1938). The assured committed suicide intending that the policy money be used to pay off his heavy debts, at a time when suicide was a criminal offence. The court held that the insured could not benefit from his willful misconduct and it was also against public policy for the insured to benefit from his criminal act.Liability insuranceIf the insured incurs liability to another in the course of committing a crime the general principles apply. However, public policy may allow the victims of the crime to be paid damages awarded to them even if the insured would have no claim against the insurers. Under the Road Traffic Act 13: 11 a person who is deliberately injured by another or the representatives of a person who is killed can claim damages directly from the insurers.5.2 Improper pressureA contract is voidable by a person who has been led to enter into it by improper pressure. People usually enter into contract under some pressure, economic, persuasive or both. A contract is not voidable because one party was in position to drive a hard bargain or used selling techniques.The pressure must be improper as in the following circumstances(a) DuressDuress involves use of force, threats of force, and unlawful threats to the plaintiff’s property or business interests. Duress effectively forces the other party to agree against his will.(b) Undue influenceCertain relationships are presumed to give rise to improper pressure. This occurs when one party holds a dominant position over the other or is able to take advantage of the relationship of trust and confidence between them.The relationships include: - parent child, doctor patient, solicitor client, religious leader and follower. If such relationship exists the person seeking to have the transaction set aside need only show that the arrangement was generally unfair. It is then up to the other party to disprove undue influence.An insurance contract could be in theory be obtained by duress or undue influence, however, high pressure selling will not amount to improper pressure.5.3 MistakeThe validity of a contract may be affected by mistake which makes the contract void.Both parties may have the same mistake e.g. believing that something one intends to buy from the other exists. An agreement exists but will not have the intended effect.Alternatively the parties may effectively make different mistakes, as when one party believes they are contracting about one thing and the other thinks they are contracting about another. No agreement exists as the parties are at cross purposes.Mistake only affects the contract if it fundamental, i.e. if is so important that its effect undermines the whole contract. The mistake must be of fact and not law as ignorance of law is no excuse.5.3.1 Mistake concerning the subject matter of the contractMistake may be as to the existence of the subject matter e.g. a contract for the sale of a cargo of wheat when the wheat no longer exists.Mistake may be as to the identity of the subject matter.Mistake may concern the quality of the subject matter.

5.3.2 Mistake as to the identity of the other partyIf A enters into a contract with B believing that he is dealing with C. A contract will only be held void for mistake on these grounds where the identity of the party is material in the sense that the plaintiff intended to deal with a particular person and no one else.5.3.3 Mistaken of written documentsA person is bound by the terms of a document which he has signed whether he has read it or not. The principle is disadvantageous to a signer who is illiterate if the contents of the document have been read to him wrongly. Protection exists in common law under the non est factum rule (not my deed) only if:-- the signer has no real understanding of the document because of defective education, illness or

innate capacity.- There is fundamental difference between the document actually signed and the one which the

signer believed it to be- The signer can show that he was not careless in signing the document5.3.4 Mistakes in recording agreements (rectification)If parties put their contract in writing but make an error in recording what they have agreed on, the court may allow error to be rectified so that it reflects the true agreement. The mistake must be made by both parties.5.3.5 Mistake and insurance contractsThe principles outlined above apply to insurance contracts. An insurance contract may be held void on the grounds of common mistake as to the existence of the subject matter of insurance e.g. death of the life assured when the contract of insurance is made.5.4 MisrepresentationThe formation of a contract is often preceded by negotiations where one party makes statements of fact intended to the other party to enter into contract or to enter into it on particular terms. The other may make representations i.e. statements which induce the other party to enter into the agreement.A misrepresentation is a false statement of fact which induces the other party to enter into the contract. It may be fraudulent, innocent or negligent.For misrepresentation to have a damaging effect on the following requirements must be met:(a) The misrepresentation must be one of fact(b) The misrepresentation must be made by a party to the contract(c) The representation must be material(d) The misrepresentation must induce the contract(e) The plaintiff must suffer damage as a result of the misrepresentation5.4.1 Misrepresentations: effects and remedies(a) Fraudulent misrepresentationA representation is fraudulent if the person who makes it knows it is false, has no belief in its truth or makes it recklessly i.e. not caring if it is true or false.Remedies- Rescission :- the plaintiff may bring action to rescind the contract - Damages:- the plaintiff may bring action for damages. Where there is fraud, the action for

damages can be in addition to the action for rescission.- Refusal of further performance :- The injured party can refuse to perform his part of the contract

if he has not already performed it.Misrepresentations make the contract voidable. The injured party may choose to affirm the contract (treat it as binding) if he wishes. He can do this by conduct or express words and cannot later rescind.(b) Innocent misrepresentationThis is a false statement which the person making it honestly believes to be true:Remedies- Rescission :- the is available but the court may award damages. The court can its discretion

award damages instead of rescission. - Damages:- the plaintiff may bring action for damages

Refusal of further performance :- The injured party can refuse to perform his part of the contract or affirm the contract if he wishes.(c) Negligent misrepresentationThis is a false statement which is made carelessly rather than dishonestly.Remedies- Rescission :- the is available but the court may award damages instead. - Damages:- the injured part may claim damages in tort for negligence but must prove that the

other part was at fault.Refusal of further performance :- The injured party can refuse to perform his part of the contract or affirm the contract if he wishes.5.5 Non-disclosureParties to a contract are under no positive duty of disclosure. Misrepresentation will harm the contract but there are obligations to make any representations at all. In the sale of goods the position is summarized by the expression “caveat emptor”: ‘let the buyer beware’In some circumstances a duty of disclosure exists. For instance, representation made in the course of negotiations subsequently becomes untrue because of a major change in circumstances. There is need to correct the original statement if the changes takes place before the contract is concluded.In With v. O’Flanagan (1936) a doctor sold his business to another, having represented that takings from the practice were £ 2000. This was true at the time, but had reduced considerably when the contract was concluded five months later because of the doctor’s own illness.5.5.1 Contracts Uberrimae Fidei : “ of the utmost good faith”A duty of disclosure exists in relation to some contract where one party is more likely than the other to know material facts. Insurance contracts are the most important examples in this class.

A.SPECIAL PRINCIPLES OF INSURANCE CONTRACTS

1. Insurable interest

1.1 Definition

Legal right to insure arising out of a financial relationship, recognized at law, between the insured and the subject-matter of insurance.The subject matter of insurance can be any form of property or an event that may result in the loss of a legal right or the creation of a legal liability e.g. buildings under fire insurance, a person’s legal liability for injury or damage under liability insurance, life being insured under life assurance, a ship and its cargo in marine insurance.What is insurable is the insured’s financial interest in the insured item.The financial interest which the person has in the subject-matter of insurance is called the subject matter of contract.1.2 Essentials Features of Insurable Interest

(a) There must be some property, right, interest, life , limb or potential liability capable of being insured.

(b) Such property, right, interest, etc, must be the subject matter of insurance. (c) The insured must stand in a relationship with the subject matter of insurance whereby

he benefits from its safety, well being or freedom from liability and would be prejudiced by its damage or the existence of liability.

(d) The relationship between the insured and the subject-matter of insurance must be recognized at law.

1.3 HistoryInsurance over the ages was possible even if the insured had no insurable interest in the subject-matter of insurance. This distasteful practice which also served as an inducement to murder and other unscrupulous activities was halted by the enactment of the following legislation:(a) Marine Insurance Act 1745This act forbade the issuing of marine policies without insurable interest in the subject-matter of insurance.

(b) Life Assurance Act 1774This Marine Insurance Act 1745 related to marine insurance only and it was still possible to gamble on people’s lives and other events.The Life Assurance Act 1774 forbade issuing of life policies without insurable interest. Failure to show interest makes the policy illegal.This Act provided for the following:1. Insurances on lives of people or any event in which the beneficiary had no interest were null and

void.2. The name of the beneficiary was to be inserted in the policy.3. No amount greater than the interest of the insured could be recovered.4. The Act did not extend to insurances on ships, goods, or merchandise.(a) Marine Insurance Act 1778Under the Marine Insurance Act 1745, goods unconnected with the ship could be insured with no insurable interest. The Marine Insurance Act 1778 stopped the practice and made it compulsory for names of people interested or concerned to be inserted in the policy.The effect was that insurance contracts where no insurable interest exited were null and void.(b) Marine Insurance Act 1906This Act repealed the 1745 Act and those parts of the 1788 Act to marine insurance. It codified these Acts and declared void any marine insurance where no insurable interest existed at the time of loss. (c)Marine Insurance (Gambling Policies) Act 1909This Act made gambling or wagering contracts illegal. It also made it criminal to effect a marine insurance policy where no insurable interest existed.Comparison of Insurance and Wagering contracts

Insurance Contract Wagering ContractInsurable in the subject-matter is essential The interests are limited to the stake to be won or

lost and are not recognized at lawThe insured is protected from loss and his identity is known before the event

Either party may win or lose and the losser can only be identified after the event

Full disclosure (uberrimae fides) is required by both parties to the contract

Full disclosure (uberrimae fides) is not required by either party

In most case an indemnity only is secured The stakes are not paid by way of indemnity. Payment is made without suffering loss beforehand

The contract is enforceable at law Neither party has any legal remedy

1.4 Creation of Insurable InterestInsurable interest may arise at common law, e.g. ownership of property or the potential liability a negligent driver has for a claim from an injured pedestrian.Insurable may arise from contracts e.g. lease making a tenant responsible for the maintenance or repair of the building. The lease agreement places the tenant in a legally recognized relationship to the building and gives them an insurable interest.1.5 Application of Insurable InterestThe principle of Insurable Interest is applied differently to the various forms of insurance.(a) Life AssuranceEveryone has unlimited insurable interest in his own life. Theoretically he is entitled to effect a policy for any sum assured. In practice, ability to pay the premium often limits the amount of the sum assured the person can purchase.In addition insurable interest exists in the following relationships:- Spouses in each other’s lives to an unlimited extent- Business partners in each others lives up to the limit of their financial involvement.- Creditor in the life of the debtor to the extent of the loan plus interest.

- Parents in the lives of their children subject to limits as provided for in the Insurance Act Chapter 24:07Blood relationships do not on their own imply automatic insurable interest.(b) Property InsuranceIn property insurance, insurable interest usually arises out of the ownership of the subject matter of insurance. For example, a house owner insuring his house, a golfer insuring his clubs, a shop owner insuring stock.Insurable interest may also arise from the following legal relationships and financial interests.1. Part or joint owners – a person having a partial interest in a property must insure for the full value of

the property. Any money received in respect of claims exceeding his own financial interest should be passed to the other owner(s).

2. Mortgagees and mortgagors – both have an interest. Purchaser as house owner. Mortgagor as creditor.

3. Executors and trustees – they are legally responsible for the property under their charge.4. Bailees – a bailee is a person legally holding goods of another either for payment or gratuitously. E.g.

pawnbroker, launderer, watch repairer. Each has a responsibility to look after the goods as if they were his.

5. Agents – an agent can insure on behalf of his principal provided his principal has insurable interest in the subject matter of insurance.

6. Husband and wife – each spouse has an insurable interest in the property of the other.(b) Liability InsuranceAny person has an insurable interest to the extent of any potential liability he/she may incur. The potential of liability has no limit but is largely based on legal precedents.1.6 When Insurable Interest must existIn marine insurance the insured must have interest in the subject matter insured at the time of the loss. In life assurance, insurable interest in only required at inception.(Dalby v.The India and London Life Assurance Company (1854).In other insurances insurable interest must exist both at inception and at time of loss otherwise it would be a wager.1.7 Common features of insurable Interest(a) Insurer’s insurable interestInsurance companies have an insurable interest in their ability to pay claims. This allows them to seek reinsurance.(b) Enforceable at lawThe mere expectation of a benefit in future may not be enough to create insurable interest.(c) Equitable interestReasonable interest is not enough to create insurable interest. For example a lender in a formal mortgage before deed is drawn up.(d) PossessionPossession of property accompanied by responsibility supports insurable interest.(e) Criminal actA person cannot recover under a policy in respect of his criminal acts. (Beresford v.Royal Insurance (1938). This case concerned a suicide under a life policy.1.8 Financial ValuationInsurable interest must be capable of financial valuation. This is easy in property insurance. Valuation is difficult in the case of one’s own life or life of a spouse where it is taken that there is unlimited interest.On other policies on the life of another, certain interests are capable of valuation, e.g. creditor’s interest on the life of a debtor for the amount of the debt, plus interest and insurance premium.1.9 Assignment of Insurable InterestCession of an insurance policy (transfer of rights) can be carried out in the case of personal contracts with the prior consent of the insurer is required. The insurer need to be satisfied by the day to day activities and the attitude of the new insured as that may influence frequency and severity of a loss.2 Utmost Good Faith

2.1 Non-Insurance ContractsThe doctrine of ‘caveat emptor” applies. It is the responsibility of each party to the contract to ensure that they make a good or reasonable bargain.The parties are under no duty to disclose information which is not asked for. As long as one party does not mislead the other party and answers questions truthfully, the other party cannot avoid the contract.

2.2 Insurance ContractsThe proposer knows all the relevant facts about the risk being proposed. The underwriter can have a survey carried out, but he must rely on information given by the insured in order to assess those aspects of the risk which are not apparent at the time of a survey.The law imposes a duty of utmost good faith on the parties to an insurance contract.This was summed up by Scrutton LJ as follows:As the underwriter knows nothing and the man who comes to him to ask him to insure knows everything, it is the duty of the assured to make a full disclosure to the underwriter without being asked of all the material circumstances. This is expressed by saying it is a contract of the utmost good faith. (Rozanes v.Bowen (1928).2.3 Reciprocal dutyThe duty of full disclosure also rests on the underwriter. They must not withhold information from the proposer, so as to him into a less favourable contract.For example:- Not to withhold from proposer that a sprinkler system in his premises entitles him to a substantial discount on his fire insurance premium.- Not to accept an insurance which they know is unenforceable at law or which they are not registered to underwrite.

- Not to make untrue statements during negotiations for a contract.2.4 DefinitionIs a positive duty to voluntarily disclose, accurately and fully, all facts material to the risk being proposed, whether asked for them or not.(a) Material fact – every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.(b) Facts which must be disclosedAny fact which could influence the insurer in accepting or declining a risk, or in fixing the premium or terms and conditions of the contract is material and must be disclosed.

The following facts must be disclosed:

1. Facts which show that the particular risk being proposed is greater because of individual, internal factors than would be expected from its nature or class.

2. External factors, which make the risk greater than normal3. Facts which would make the likely amount of loss greater than that normally expected4. Previous losses and claims under the policies5. Previous declinature or adverse terms imposed on previous proposals by other insurers6. Facts restricting subrogation rights due to the insured relieving third parties of liabilities which

they would otherwise have7. Existence of other non-indemnity policies such as life and accident8. Full facts relating to and descriptions of the subject matter of insuranceExamples of facts requiring disclosure

1. Fire Insurance – the form of construction of the building and the nature of its use2. Theft Insurance – the nature of stock and its value3. Motor Insurance – the fact that a vehicle will be driven regularly by someone other the insured4. Marine Insurance – in cargo insurance the fact that a particular consignment will be carried on

deck5. Life assurance – previous medical history

6. Personal accident insurance – previous history which might make an accident more likely, the results more severe or the recovery slower than normal.

7. In all classes of insurance – previous loss experience and all the facts the proposer could be reasonably expected to know.

(c) Facts which need not be disclosedThe following facts need not be disclosed:1. Facts of law – everyone is deemed to know the law2. Facts the insurer is expected to know – facts of common knowledge e.g. processes within a

particular trade3. Facts which lessen the risk – the existence of an intruder alarm system in a theft risk4. Facts which the insurer has been put on enquiry e.g. where proposer has referred the insurer to

a claims record under a previous policy with a previous insurer and the insurer does not request information from the previous insurer. The insurer is assumed to have waived his right to the full information.

5. Facts which the insurer’s survey should have noted – material facts which are visible or which a reasonable surveyor would enquire about.

6. Facts covered by policy conditions – facts which are subject to any express of implied warranty e.g. maintenance of an insured vehicle in roadworthy condition.

7. Facts which the proposal does not know8. Facts on spent convictions

2.5 Duration of the duty of disclosureDuration of the duty to disclose material facts vary with the circumstances:(a) Common LawAt common law the duty starts at the inception of negotiations for a contract and terminated when the contract is formed. There is no duty to disclose changes while the contract is running.(b) Contractual dutyThe conditions of a policy may extend the common law position by requiring full disclosure during the currency of the policy and allowing the insurer to underwrite the change.(c) Position at renewalPosition varies as follows:Long-term business – no duty operates at renewal. Insurer is obliged to accept the premium.Other business – original duty of disclosure is revived at renewal.(d) Alterations of the contractAny policy changes to terms of contract revive the duty of disclosure e.g. in increasing the sum assured or revival of a lapsed policy.

2.6 Breach of the doctrine of utmost good faithThe aggrieved party has the following options at his disposal:- Avoid the contract by repudiating it ab initio or refusal of liability for an individual claim.- To sue for damages if concealment or fraudulent misrepresentation is involved.- To waive these rights and allow the contract to carry on unhindered.2.7 Compulsory InsurancesCertain insurances e.g. motor insurance for third party liabilities are required by statute to ensure that insurance money to meet third party injury or property damage claims will be available.The RTA Act Chapter 13:11 prohibits insurers from avoiding liability on the grounds of certain breaches of utmost good faith. However, insurers endorse their policies to the effect that amounts paid on claims which would not have been paid in the absence of statutory limitations may be recovered from the insured.