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PSM 400 Legal Aspects of Procurement
PSM 400 Legal Aspects of Procurement
Study Manual
Distance Learning Module
P O BOX 29677-00100
NAIROBI
Copyright
ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored
in a retrieval system or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise without the prior written
permission of the copyright owner. This publication may not be lent, resold,
hired or otherwise disposed of by any way of trade without the prior written
consent of the copyright owner.
Instructions to students
This study manual is intended to assist distance-learning students in their
independent studies. In addition, it is only for the personal use of the
purchaser, see copyright clause. The course has been broken down into
seven (7) lessons each of which should be considered as approximately one
week of study for a full time student. Solve the review questions, verifying
your answer with the study materials provided and the recommended text
books and journals.
The course textbook and journal are:
TEXTBOOKS AND JOURNALS FOR THE COURSE
1. Bovis, Christopher, (2006) EC Public Procurement: Case Law and Regulation, Oxford
University Press,
2. Smith, J. C. (2002). The law of contract (4th ed.). London: Sweet & Maxwell.
3. Journal of Public Procurement, Academic Press
Arrowsmith, S. (2005) The Law of Public and Utilities Procurement, 2nd ed.,.Sweet &
Maxwell,
Arrowsmith, S., Linarelli, J., Wallace, D. Jr. (2000) Regulating Public Procurement:
National and International Perspectives, The Hague: Kluwer Law International,.
Government of Kenya (2005), Public Procurement and Disposal Act, Government
Printer
Jrg T. and Dickersbach. (2004) Supply Chain Management with APO: structures,
modelling approaches and implementation peculiarities. Springer-Verlag, Berlin
Kirk, W B. and Flynn, M. (2004)The Legal Aspects of Public Purchasing, Herndon, VA:
National Institute of Government Purchasing
International Journal of Procurement Management, Inderscience Publishers
Acknowledgement
We wish to express our sincere gratitude and appreciation to Mr. Wycliffe
Arani for his immense contribution towards the preparation of this study
pack on the Principles and Practice of Management. He is a part time lecturer
at the Management University of Africa, Jomo Kenyatta University of
Agrcultre and Technology, Karatina University and Dedan Kimathi University
of Technology.
Table of Contents
Copyright.................................................................................................................... ii
Acknowledgement..................................................................................................... iv
1.0
1.1
1.2
1.3
Classification of law.........................................................................4
1.4
Sources of law...............................................................................7
1.5
Review questions......................................................................................... 11
Discharge of a contract...........................................................................33
57
the government upholds the doctrine of the rule of law which provides that laws in a
country must be obeyed. In commercial transactions law becomes important aspect
since the parties involved in business are supposed to honour their agreements as they
perfect their respective areas of business. In a situation where the business parties
have some legal dispute, the law invariably determines the aggrieved party hence
compensation is extended to the party in question to mitigate the losses.
1.2 The link between law and purchasing:
In the contemporary business environment, it is becoming increasingly important for
purchasing professionals to keep abreast of legal developments relevant to their role of
acquisition of goods/services within their organizations whether private or public. The
distinct reasons for purchasing professionals to have a working knowledge of
commercial law entail the following:
-
First, the principle of ignorantiajuris non excusat (ignorance of the law does
not excuse) means that a company (which, in law, is a legal person) and its
servants, such as purchasing specialists, are presumed to know the law.
Second, all purchasing staff should have an awareness of the possible legal
consequences of their actions.
Third, a little knowledge is a dangerous thing and knowledge of the law should
indicate when it is advisable for buyers to seek professional advice.
Fourth, purchasing function is purely law rounded. This means that every step in
purchasing engrosses legal implications and to this extent therefore it is
worthwhile for the purchasing professionals to be acquitted with concepts of law.
Issues of concern in purchasing which have legal implications comprise: offer
and acceptance, counter offer, order document (LPO), delivery document, pricing
of the products, terms of payment, availability of the product, make/model of the
product, issues of warranty, quality/quantity of the product, delivery date.
2
Functions of law
Limitation of Law
Public law regulates the relationship between the state and the individual to
ensure peace, order and good governance of the country. Public law has three
branches;
Civil law is concerned with rights between individuals where individual rights are
infringed. Civil cases comprise: Defamation, issuing bouncing cheque etc. An
individual may sue to recover compensation by way of various remedies e.g.
damages, injunction or specific performance.
Law of contract- the law that determines business agreements between two
parties
Law of tort- is the law that relates to civil wrongs and gives remedies. Is a civil
wrong which is rented in common law action for unliquidated damages which is
not exclusively the breach of contract e.g negligence, defamation, trespass.
Law of property- deals with the nature and extend of right which people may
enjoy over land and other property.
Law of succession-deals with personal rights of property and how it can be
transferred on the death of a person to his heirs
3) Procedural and substantive law:
- Procedural law (remedial law) lays down the rules for regulating court proceedings
during civil and criminal trials. This includes the civil and criminal procedure
codes and the law of evidence. To that extend therefore procedural law
prescribes the methods of enforcing rights which exists in by reason of
substantive law. Also the law in question is in most cases used in courts to
ascertain the methods of procedures to follow.
- Substantive law on the other hand lays down the actual rule of law. It includes the
laws that create, define, regulate legal rights and obligations thus the rule in
contract that an offer must be communicated to offeree is substantive.
4) International law:
International law is the branch of public law which has two main branches, namely,
Public
Section 3 of the Judicature Act (Cap 8 Laws of Kenya) sets forth the sources of Kenyan
law in the following order:
1) The Kenyan constitution
2) All other written laws including the Acts of Kenya parliament and of the United
Kingdom
3) The substance of the common law, the doctrine of equity and statutes of general
application
4) African customary law
5) Islamic law
The Kenyan constitution:
-
Lord James Bryce defines the constitution as consisting of those rules of laws
which determines the form of its government and the respective roles of its
organs and the respective rights and duties of it towards a citizen and of a citizen
towards the
Government.
The position of authority enjoyed by constitution within the legal order i.e.
supremacy of the constitution.
All other written laws including the Acts of Kenya parliament and of the United
Kingdom:
This is the enacted law commonly known as legislation including Acts of parliament and
subsidiary legislation. The legislative power is vested with parliament. This power is
exercised by the passing of a bill by the National Assembly to become an Act of
Parliament (statute). A bill is a draft of a proposed Act of parliament which after 1 st, 2nd
and 3rd reading is presented to the president for his assent. Once he assents, the bill
becomes law thus an Act of Parliament.
The substance of the common law, the doctrine of equity and statutes of
general application:
Common law:
Originally the term common law meant the law that was not confined to one particular
area.
Now the term is used to signify the law (other than the legislation) which originated in
the ancient customs and was developed by judges on the principle of stare decisisi.e.
Judges are obliged to respect the precedents established by prior decisions.
Section 3 (c) of the Judicature Act recognizes the substance of the common law and the
doctrine of equity as the source of Kenya law to the extent that our courts find them
compatible with the needs of our people. The courts are absolutely free either to modify
the rules of common law and equity or to reject them altogether.
The doctrine of Equity:
Equity is a set of rules formulated and administered by the court of Chancery before
1873 to supplement the rules of common law. Equity rules were collection of rules which
were formulated to remedy defects in common law or to make it more reasonable.
During the early development of equity the early chancellors acted at their own
discretion, but eventually they did follow the decisions of earlier Chancellors. Thus, by
the 8th century, some firm rules of equity were established which guided later
chancellors in deciding disputes. Some of these maxims are:
Equality is equity
traditions of its people. After independence, the customary laws of Kenya have been
accorded full recognition as a source of Kenya law. Section 3(2) of the Kenya
Judicature Act provides:
The High court and all subordinate courts shall be guided by African customary law
in civil cases in which one or more of the parties is subjected to it or affected by it, so
far as it is applicable and is not repugnant to justice and morality or inconsistent with
any written law, and shall decide all such cases according to substantial justice
without undue regard to technicalities of procedure and without any delay.
It is important to note that customary law, according to section 3(2):
a) Only applies in civil cases i.e. where a dispute is between individuals and the
state is not involved as a party e.g. breach of a contract
b) Does not apply in criminal cases
c) Only applies where it is not repugnant to natural justice and morality
d) Applies where it is not inconsistent with any written law in Kenya
African customary law is applicable where the proceedings concern claim under
customary law basically law disputes, personal and family affairs. These issues of
concern comprise:
Matters affecting status and in particular the status of women, widows and
children, including guardianship, custody, adoption and legitimacy
Islamic law:
10
The rules of Islamic law are derived from the Muslims religious book Quran which was
revealed to Prophet Mohammed. It is a limited source of Kenya law and is applied by
Kadhis courts where both parties profess the Muslim faith and the dispute is related to
one of the following matters: personal status, marriage, divorce and Inheritance.
1.5 Review questions
1. Define the term law
2. Discus various sources of law in Kenya
3. Discuss the importance of law in procurement
11
The general rule of common law is that a contract can be entered orally, in
writing, partly orally and partly in writing, or may be merely implied from the
conduct of the parties to it.
Basically a valid acceptance of a valid offer results in a valid contract. A valid contract
is one that is legally effective and enforceable in court.
-
A void agreement cannot be enforced in court by either part. It has no legal force or
effect.
a voidable contract- these type of contracts are valid until they are repudiated by
the innocent party. For example, when one party persuades the other to contract by
means of fraud, the sales contract is voidable, by the buyer who has been misled.
Also contract with a minor is also voidable eg in Sternberg vsScala Ltd, an infant
purchased and partly paid shares in the defendant company. The infant was unable
to pay the balance against her shares and therefore repudiated the contract and
claimed back the money she had paid in respect of the shares she was holding. The
court held that she was entitled to repudiate the contract but she would not recover
the money paid because there had not been a total failure of consideration since the
shares had a potential market value
12
Rules of offer
The offeror cannot bind the other party without his consent
(FELTHOUSE v BINDLEY, 1862)
13
F wrote to his nephew offering to buy one of his horses adding If I hear no
communication from you I consider that the horse is mine at 30.15 pounds. The
nephew did not reply, but told Bindley, an auctioneer, to keep the horse out of the
sale of his farm stock as it was sold to the plaintiff. Bindley sold the horse by mistake
and F sued him for damages. Held that as the nephew had never communicated his
acceptance to F. There was no contract of sale and the auctioneer was not liable.
The offeror may attach any conditions to his offer, but must communicate them to the
offeree, before they bind him by his acceptance of the offeree. In commercial
agreement, this rule is
important where the terms of the offer are usually of a complex nature.
An offer must be distinguished from: Invitation to treat Invitation to treat and a mere
supply of information
Invitation to treat: are ways of obtaining information or inviting offers from
prospective offerors. They are an offer to negotiate and occur in the stages prior to
an offer being made. In
the tendering process invitations to tender are invitation to treat. Examples of ITT
when he presented them at the cash desk and not when he removed them from the
shelves.
Advertisements:
As a general rule the advertisement of goods for sale is not regarded as an offer.
It is merely inviting offers from readers and do not constitute legal offers.
In Partridge v Crittenden (1968) an advertisement in a news paper for the
sale of bramble finches, cocks and hens, 25 shillings each was held to be
invitation to treat. However it is possible that depending on the information on
the website, it could be regarded as a unilateral offer.
Exceptions to ITT
Automatic machines:
15
Display of goods (automatic vending machines) is an offer to sell these goods and
not a mere invitation to treat. Why? No further bargaining between the parties is
either possible or necessary. The customer accepts the offer by putting money in the
machine and signifies acceptance by receiving the goods/receipt/ticket. If the
machine is empty its implied that the offer continues only while stocks last.
standing offer.
Mere supply of information: The mere statement of the lowest price at which a
person will sell property or goods contains no implied condition to sell at that price to
the person making such
enquiry.
(HARVEY v FACEY, 1893)
In this case, H telegraphed to F: Will you sell to us Bumper Hall Pen? Telegraph
lowest cash price. F replied: Lowest cash price for Bumber Hall Pen is 900
pounds. H telegraphed back we agree to buy. F refused to sell the item in question
16
and H sued him contending that a telegram constituted a binding contract. It was
held that F was merely stating the lowest cash price and not making an offer.
Termination of offer:
by unconditional acceptance
An offer ends at the time stated in the offer
An offer not stating how long it will remain open, terminates after a reasonable
length of time
An offer ends if its rejected by the offeree
An offer ends if the offeree makes a counter offer
An offer is terminated by death or insanity of either the offeror or offeree
An offer usually ends if it is revoked or modified by the offeror before the offeree
accepts it
Rules of revocation:
a) Revocation of an offer must be communicated to the offeree, though not necessarily
by the offeror himself; it is sufficient if the offeree comes to know of it through any
reliable source.
(Dickinson V Dodds, 1876)
On Wednesday, the defendant gave the plaintiff a written offer to sell his house at
800 pounds. The offer was to be left open until next Friday 9 AM. On Thursday, the
17
defendant sold the house to someone else. On that very evening of Thursday, the
plaintiff was told by a third party that the house was sold to someone else. But
before 9 AM on Friday, the plaintiff delivered his acceptance to the defendant, which
the defendant refused to receive. It was held by the court that there was a proper
revocation of the offer and the plaintiff could not accept it.
b) The revocation by post does not take effect until it is actually received by the offeree
(Bryne V Van Tienhoven, 1880)
On October 1, the defendant posted an offer to sell some goods to B in New York. B
received the offer on the 11th, and immediately telegraphed his acceptance. On 8 th,
the defendant wrote a letter to B, revoking his offer and this was received by B on
25th. Held that the revocation, though posted on 8 th, was of no effect until it reached
B on 25th and the contract was completed on 11th when B telegraphed his
acceptance.
c) Where offeror promises orally or in writing (not under deed) to keep his offer open
for a specified time, he is not bound by it i.e. he can still revoke it at any time before
the expiration of that time unless:
The promise to keep the offer open is supported by consideration that is the offeree
paid some money to the offeror to keep his offer open for a specified period.
The promise to keep the offer open was made under seal. A promise under seal
does not require consideration.
18
A promise to keep an offer open for a certain specified time is called an option.
Normally this promise is not binding on the offeror unless it is under seal or the
offeree happens to give out some consideration to the offeror.
Acceptance:
Acceptance is the final expression of essence by word or conduct to the offer or
proposal conveyed in the manner indicated by the offeror where a particular means
of communication is requested/implied. Acceptance is final and unequivocal (no
varying of offeror terms or coding new ones). Any attempt to introduces new terms or
vary the offer amounts to a counter offer and not an acceptance of the original offer
(a rejection of original offer)
Rules of Acceptance:
Acceptance by post:
Where the parties choose post as a medium of entering into a contract, the
following rules apply:
19
An offer becomes effective when it reaches the offeree, not when the letter of
offer is posted.
2) Consideration:
Consideration is something of value in the eyes of the law which constitutes the
price for which constitute the price for which the promise of the other party is
bought. It is that which is actually given or accepted in return for a promise. E.g.
company A receives kshs 1,000 and in return promises to deliver goods to
company B. The consideration for the delivery is kshs 1,000 Consideration to
support a contract may either be:
(i)
20
Adequacy is about the value or the amount of consideration. The law is not
interested in how good a deal you have made as long as it is clear that you
have made some kind of deal
Consideration must not be past. It means some past act or forbearance which took
place before the promise is made.
Consideration must move from the promisee. The statement means that no one can
enforce anothers promise unless he has been a party to a contract, and provided
consideration to the promisor. A stranger to a consideration cannot sue on the
contract, although made for his benefit.
Part payment of debt is not considered as sufficient consideration to settle the debt
in full
England, it became apparent that because of ill-health, the wife could not return to
Ceylon. The husband promised to pay her thirty pounds a month whilst forced to live
apart. He failed to pay, and his wife sued on the contract. Held that the husband was
not liable because there was no necessary
implication from the circumstances of the parties that they intended to make a
legally binding contract. It was more like a domestic arrangement between husband
and wife rather than a contract.
4) Contractual capacity:
The general rule is that any person may enter into a contract but certain categories
of persons due to age, status or mental instability, Lack contractual capacity hence
renders the contract void, voidable or unenforceable. Any person who claims
exemption from liability on the ground of incapacity to contract must prove such fact
and in the absence of this proof he will be liable on
the contract. The special rules affecting each class of persons are as follows:
Infants or minors: A minor is a person who has not attained 18 years of his age. A
contract with or by a minor is void and a minor, therefore cannot bind himself by a
contract. It is presumed that a minor is not competent to contract. However,
contracts for supply of necessaries can be enforced e.g. contracts beneficial to an
infant in terms of education and training.
Persons of unsound mind: A person is said to be of unsound mind for the purpose
of making a contract, if at the time when he makes it, he is incapable of
understanding it and of forming a rational judgment as to its effect upon his interests.
Whether a party to a contract, at the time of entering into the contract, was of sound
mind or not is a question of fact to be decided by the court.
Married women: A married woman has full contractual capacity and can sue and be
sued in her own name. She is not incompetent to contract. A husband will be liable
22
for his wifes contracts if the transactions were entered into at a request or on his
behalf. Where husband and wife are living together, there is presumption that the
wife is authorized by her husband to pledge his credit for necessaries.
Corporations: Corporations can enter into contracts within the scope of the
purposes for which it was formed/incorporated as derived from the object clauses in
the memorandum of association and cannot enter into contracts beyond the
authorized power since by doing this the corporations will be deemed to be acting
ultra vires (outside their powers).
Common mistake to the existence of the subject matter: This type of mistake occurs
where both parties assume the existence of the subject matter of a contract. For
example A sells his car to B.
Both parties to the contract believe that the car is parked at As house but in actual
fact the car is stolen before the contract is entered into. The contract is void as the
both parties have made the same mistake regarding the existence of the subject
23
Mutual mistake to the identity of the subject matter: A mistake merely in the
expression is not sufficient to avoid the contract, what is really required is to prove
that the parties to the contract concentrated on cross-purposes; i.e. they never met
on the same point. For example, X having two houses Mount lodge and Park lodge
in the same area, offers to sell Mount lodge to Y and Y not knowing that X has two
houses, thinks that it is Park lodge and agrees to buy it. There is no really consent
and the contract is void.
Mistake to the quality of the subject matter: Mere mistake as to the quality of the
subject matter of a contract does not render it void. For example, where A sells a
painting to B which both believe to be an original work of a famous artist but turns
out to be a modern imitation, the contract remains valid in common law. The general
principle applicable is caveat emptor, ie buyer beware.
Mistake as to the identity of the other party: This type of mistake will nullify the
contract where the identity is of material importance and the mistake is known to the
other party.
Unilateral mistake: In unilateral mistake, only one of the parties is mistaken, while
the other is not. As a rule, this type of mistake will not be sufficient to render the
contract void but in a situation where one of the parties is mistaken and the other
party is aware of such erroneous belief, the contract may be avoided.
Mistake to the nature of document: The general rule of law is that a person is bound
by the terms of any document which he signs.
statement and infact entered into contract and that the statement was untrue.
Elements of mispresentation:
A person who wishes to avail himself of the defence of mispresentation in avoiding
the contract must prove:
That the representation was a statement of material fact and not a statement of law
or mere expression of opinion
Duress: This is the actual or threatened violence to one of the parties to a contract
or to a member of his family. It also includes threatened imprisonment, criminal,
prosecution or dishonor of a member of his family.
Undue influence: A contract is said to be induced by undue influence where one of
the parties is in a position to dominate the will of another which prevents him from
making his judgment freely. Thus a person may avoid the contract if he can prove:
that the other party has dominated his will and that the transaction is substantially
25
unfair.
6) The object of the contract must be lawful:
One of the essential elements of contract is legality of the objects. Illegality of the
contract affects the validity of a contract. Contracts can be declared illegal either by
statute or common law. An illegal contract is void and cannot be enforced. Certain
contracts are prohibited by statutes and statutory regulations for instance contracts
which infringe the exchange control regulations made under the exchange control
act are prohibited.
A condition that the seller has the right to sell the goods
A warranty that the buyer shall have and enjoy quiet possession of the goods
A warranty that the goods are free from any charge or encumbrance in favour of any
third party.
A condition that the goods shall correspond with description if sold by description
A condition that the goods shall correspond with sample and description if sold by
sample and description.
A condition that the goods will be suitable for the purpose stated by the buyer to the
seller.
A Condition, if sale by sample, that the bulk shall correspond with the sample.
Terms implied by the court:
The courts do not readily imply terms nor do they rephrase, rewrite or alter the
agreement they consider that the contract the two parties produce should be self
sufficient. It is a general rule of interpretation that where there is an express
provision in a contract, the court will not imply any provision relating to the same
subject matter.
27
that the opera could start on 28 November.They could only get another singer if they
hired for all the performances of the opera.They did this and refused the services of
MrsPoussard, once she was betterMrs. Poussard raised a court action to try to makethe
company pay her, However, the court said that Mrs. Poussardbreached aconditionof the
contract when shewas unable to perform on 28 November.This was a basic term of the
contract
The position was different inBettini v Gye
Bettini was an opera singer. He agreed to sing in London in a number of theatres
beginning on 30 March. He also agreed that he would arrive in London 6 days before
the first performance in order to practice. Bettini became ill and did not arrive in London
until 3 days before the first performance. The opera company refused to allow him to
sing.They said he had breached the contract. However, the court said that the part of
the agreement about practicing was a warrantynot a term.
Innominate terms
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 Court of
Appeal
A ship was chartered to the defendants for a 2 year period. The agreement included a
term that the ship would be seaworthy throughout the period of hire. The problems
developed with the engine of the ship and the engine crews were incompetent.
Consequently the ship was out of service for a 5 week period and then a further 15
week period. The defendants treated this as a breach of condition and ended the
contract. The claimants brought an action for wrongful repudiation arguing the term
relating to seaworthiness was not a condition of the contract.
Held:The defendants were liable for wrongful repudiation. The court introduced the
innominate term approach. Rather than seeking to classify the term itself as a condition
29
or warranty, the court should look to the effect of the breach and ask if the breach has
substantially deprived the innocent party of the whole benefit of the contract. Only
where this is answered affirmatively is it to be a breach of condition. 20 weeks out of a 2
year contract period did not substantially deprive the defendants of whole benefit and
therefore they were not entitled to repudiate the contract
Exception clauses:
The purpose of an exception clause is to limit or extinguish the liability of one of the
parties to which he would otherwise be liable in law. Such a clause will be enforced by
the court if the document containing it was an integral part of the contract and
reasonable care was taken to bring it to the attention of the other party before the
contract was made. But where a person has failed to carry out the basic obligation of
the contract, the court will not allow him to rely on the exception clause to escape
liability.
KARSALE LTD v WALLIS, 1956
W inspected a car and agreed to buy it from K. The agreement contained the following
clause:
No condition or warranty that the vehicle is roadworthy or so to its age, condition or
fitness for any purpose is given by the owner or implied herein. When delivery of the
car was made, it was in a shocking condition and incapable of self-starting. W refused
to accept the car. K sued him, relying on the exemption clause. Held that when W first
inspected the car, it was in excellent condition whereas the car which was
subsequently delivered to him, was no doubt the same car but it was in deplorable
condition. Held that breach went to the root of the contract and did not entitle the plaintiff
to rely on the exemption clause.
An exemption clause printed on a reverse side of the receipt is not valid unless some
30
Performance
Agreement
31
Breach
Impossibility or Frustration
Lapse of time
as novation.
Renunciation: It may sometimes happen that even before the time of performance
arrives, one party to a contract repudiates his liabilities. Such a breach is known as
an anticipatory breach.
The other party may either sue for breach of contract immediately or he may wait
until the time when the contract could have been performed.
33
Impossibility or frustration:
Supervening impossibility or frustration will discharge the contract in the following
circumstances:
Destruction of subject-matter
Change in law
Government interference
Lapse of time:
A contract formed for a specified time is discharged when that period of time has
elapsed. Where no specified time is laid down, the lapse of reasonable time may
render the contract unenforceable in a court of law.
Operation of law:
A contract may be discharged by operation of law under the following circumstance:
By merger: This takes place when the parties embody the simple contract into a
contract under deed and in such circumstances an action lies only on the deed.
By bankruptcy: When a person becomes bankruptcy, all his rights and obligations
pass to his trustee in bankruptcy.
By death: The death of either party will discharge a contract for personal services
but other contractual rights and obligations are not affected.
34
On breach of contract, the innocent party becomes entitled to any one or more of the
following
remedies.
a) Action for damages:
The normal remedy for breach of contract is damages. The aim of law is to place the
injured party as far as possible in the position he would have been if the contract had
been performed. It is not for every kind of damage that the plaintiff is entitled to
recover compensation. In some cases, the law considers that the loss sustained
from breach of contract is too remote to merit any compensation.
Mitigation of loss:
When a breach of contract takes place, the party suffering from the breach must
make all reasonable efforts to minimize his loss and he is not entitled to recover
those damages which he could easily have eliminated had he tried to resolve them.
If a buyer refuses to accept the delivery, the seller must try to sell those goods in the
market available and claim damages not more than the difference between the
contract price and the market price plus any incidental charges.
b) Refusal of further performance:
A party that suffers by a breach of contract is entitled to treat the contract as ended
and may refuse any further performance on his own part. But in case the victim of
the breach does not take the initiative to bring an action for rescission of contract
and the other party sues for any sums due to him, he may set up the breach as a
defence.
35
36
Precise details of the work that will be done or goods to be sold and when.
be anticipated and/or are beyond their control. These causes usually include act of
God, act of man, act of parliament, and other impersonal events or occurrences
2.7 Review question
Ace Ltd, a manufacturing company, wanted to replace all the computers in their offices
with a new comprehensive systems. They invited tenders for the provision and
installation of the equipment from various computer companies with whom thay had
dealt before. The letter inviting the tenders included the statement if the offer made by
you is the lowest offer received by us, we bind ourselves to accept such offer. In
response to the letter Niger computers Ltd bid Kshs. 360, 000, while Congo Computers
Ltd bid Kshs. 5,000 less than any lower bid. The contrac was awarded to Niger
Computers Ltd.
Ace Ltd then placed the order stating that the contract was to be on the basis of their
standard terms and conditions. However, Niger Computers Ltd purpoted to accept the
offer but on a contract form comprising their own standard terms, which included a price
variation clause. On the bottom of Niger Computer Ltds contract was a tear-off slip
acknowledging the agreement to terms. An employee of Ace Ltd duly signed and
returned the slip. Advise:
a) Congo Computers Ltd, who feel that they should have been awarded the contract
as they made the lowest bid.
b) Niger Computers Ltd, who want to raise the contract price to Kshs. 370,000,
which Ace Ltd are refusing.
38
Universal agent: A universal agent is one who has been appointed to act for the
principal in all matters.
39
2)
3)
Special: A special agent is appointed for one particular purpose. He has authority
to do that particular act or acts in that particular transaction.
4)
Factor: A factor agent is one who in the usual course of his business, has
possession of the goods or document of title to goods of his principal with authority to
sell, pledge or raise money on security of the same. The principal is bound by such sale
or pledge even though he has forbidden it unless there is a notice of such prohibition. A
factor agent has a general lien on the goods in his possession for all charges and
expenses properly incurred by him in the lawful execution of his duties.
5)
6)
Del Credere Agents: A Del credere agent is an agent for the sale of goods, who
in consideration of higher commission than is usually given, guarantees the due
payment of the prices of all goods sold by him. This guarantee is enforceable even
when it is given by him orally. But he does not make himself liable if the buyer refuses to
take delivery; his liability arises if the buyer does not pay for the goods which he has
already received.
7)
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8)
Bankers: The general relationship between banker and customer is that of debtor
and creditor but he may be an agent of his customer when he buys or sells securities
and collects cheques on behalf of his customer. The banker is an agent to pay the
customers cheque when he has sufficient funds available in his account.
3.2 Creation of Agency:
Agency may be created by:
a)
Express agreement
b)
Implication or by conduct
c)
Necessity
d)
Ratification
Express Agreement:
This type of agency will arise by formal/express appointment of an agent. As a general
rule, no particular form of appointment is necessary to create express agency. He may
be appointed verbally even if he is employed to make a contract on behalf of his
principal which must by law be in writing or evidenced in writing.
Implied Agency:
The conduct or situation of the parties may dictate that the agency relationship is
created even though no express agreement between them. The most usual examples of
such agency are as follows:
Agency by Estoppel: Whereas an agency can in general arise by the will of the
principal, he may nevertheless so conduct himself leading another to believe that
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Agency by Cohabitation: Where a man and his wife are living together, the wife is
presumed to be husbands agent to pledge his credit for necessaries suitable to his
style of living if the necessaries are such as normally fall within the wife s province to
purchase. The husband is, however, free to rebut the presumption in any of the
following ways:
That the wife was adequately provided with necessaries or the means with which
to purchase them
That he had previously warned the shopkeeper in question not to give any
credit to his wife
That he gave a public notice in the newspapers to the effect that he will not be
answerable for his wifes debts
Agency by Necessity:
An authority may be conferred by law where an agent has acted by reason of a genuine
emergency with a view to protecting his principal goods which are in danger of being
perished or deteriorated. His action must have been performed in good faith. He must
not assume the role of an agent of necessity unless he is unable to communicate with
the owner of the goods to obtain fresh instructions. An un appointed agent will bind the
principal if it can be shown he acted out of necessity and fulfils the following:
Agency by ratification:
This may arise where the person purporting to act as an agent has acted without prior
authority of the principal and the principal subsequently ratifies the transaction. The
effect of ratification is to render the contract as binding on the principal as if the agent
had been properly authorized at the time of entering into the contract. The ratification
has a retrospective effect; that is, the agency is taken to have come into existence from
the moment the agent first acted and not from the date of the principal s ratification.
The principal must have been in existence and have had full contractual capacity at the
time the contract was made. A contract entered into by promoters of a company on its
behalf before its incorporation cannot be ratified after it comes into existence.
Ratification must take place within a reasonable time and in any event before the
expiration of the time, if any, fixed for performance
The principal must, at the time of ratification, have full knowledge of the material
facts
The ratification must be of the whole contract and the principal cannot ratify part of the
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contract only
A void contract cannot be ratified. For instance a forged signature cannot subsequently
be ratified.
3.3 Rights of the Agent:
1)
Indemnity: The agent has a right of indemnity against his principal. The principal
is under a duty to indemnify his agent against all charges, expenses and liabilities
properly incurred by him in the lawful execution of his duties. The agent has a right, if
sued, to set off the value of his indemnity against the amount due from him to his
principal.
2)
Remuneration: Unless the services are rendered by the agent voluntarily and
gratuitously, he is entitled to receive any agreed remuneration and if none was agreed,
a reasonable remuneration should be given to the agent. The agreement to pay
remuneration may be implied by conduct or trade usage. The agent loses the right of
claiming any remuneration if he has misconducted himself in the performance of his
duties such as by accepting a bribe or accepting a secret commission.
3) Lien: Certain classes of agents such as factors, bankers, stockbrokers and
advocates can
hold their principals goods in respect of their remuneration and other lawful expenses
incurred in the course of execution of their duties. The right of lien is however, lost
where the agent parts with the possession of the goods.
3.4 Duties of the Agent:
1)
The agent must carry out the work undertaken according to his principal s
instructions.
44
Where he fails to act in accordance with the instructions, he will become liable for
breach and will also entitle the principal to terminate his agency without paying him any
remuneration for the work done
2)
The agent must keep his principal well informed about all matters concerning the
agency and must not disclose any information relevant to agency to a third party
3)
The agent must carry out the work with reasonable care, skill and diligence and if
he fails in his duty, he becomes liable to the principal for any loss suffered by him
4)
The agent must keep proper accounts and must produce these to his principal.
He should not mix his principal s money with his own unless the terms of the agency
permit him to do so
5)
The agent must not make any secret profit or accept bribes. Where he does so,
he will be forced to refund such amount to his principal and lose the right of receiving
commission. Apart from this, the principal can, if he chooses, repudiate the contract with
the third party.
The agent must himself do the work which he has undertaken. He cannot further
delegate his duties except in the following circumstances: Where the principal has
expressly permitted
7) The agent must not place himself between his duties and self interests and where he
finds a clash between his interests and those of his principal, he must uphold the
interests of his principal. An agent who is employed to sell his principal s house must
not purchase it for himself.
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Battle of forms
Butler Machine Tool Co Ltd v Ex-Cell-O Corp Ltd
This case is a battle of forms. The plaintiffs, the Butler Machine Tool Co. Ltd., suppliers
of a machine, on May 23, 1969, quoted a price for a machine tool of 75,535. Delivery
was to be given in 10 months. On the back of the quotation there were terms and
conditions. One of them was a price variation clause. It provided for an increase in the
price if there was an increase in the costs and so forth. The machine tool was not
delivered until November 1970. By that time costs had increased so much that the
sellers claimed an additional sum of 2,892 as due to them under the price variation
clause. Avoiding battle of forms
Use open tendering
Negotiate with suppliers to reach a compromise on standard terms and
conditions
Use framework and call off agreement/contracts
3.6 Review Questions
1. Discuss various forms of creating an agency
2. For a person to ratify a contract made on his behalf but without his
authority, discus the conditions that must be fulfilled:
3. Boggers Ltd employ Charles as their agent for the distribution and sale of
their computers. The agency agreement provides that the agency will last
for a period of two years commencing on 1 January 2015 and that
46
(ii)
Contracts of work and material (whereby the subject matter of the contract is the
provision of skill e.g. painting, repair of car, interior decoration of premises etc)
47
(iii)
Where specific goods are the subject matter of a contract of sale and they perish
without the knowledge of the seller at or before the time of contract, the contract
is void. This is based on the fact that a common mistake as to the existence of
the subject-matter renders the contract void.
Goods perished after an agreement to sell:
Where the contract is not of sale, but is only an agreement to sell and
subsequently the goods without any fault of the seller or buyer perish before the
risk passes to the buyer, the agreement is thereby avoided. This is based on the
rule that the supervening impossibility discharges the parties from their
respective obligations.
The price:
According to section 3, a contract of sale or an agreement to sell must be
supported by money consideration called the price. Any voluntary surrender of
goods by one person to another is a contract of gift and is not governed by the
rules relating to sale.
Ascertainment of price: The price may be expressly fixed by the parties in the
contract of sale or may provide for the method in which the price is to be fixed.
Where the price is not stated in the contract and no provision made for its
determination, the buyer must pay a reasonable price and what is a reasonable
price is a question of fact dependent on the circumstances of each particular
case.
4.3 Agreement to sell at valuation:
The price may be left to be fixed by the valuation of a third party, provided he accepts
the duty and performs it. But if the third party fails to make such valuation, the
agreement is avoided. If in pursuance of the contract the goods or any part thereof have
been delivered by the seller and accepted by the buyer, he must pay a reasonable price
for them. In case the third party is prevented from making the valuation by the seller or
by the buyer, the innocent party may maintain an action for damages against the party
49
in fault
4.4 Conditions and warranties:
A condition is a stipulation in a contract of sale the breach of which gives rise to a right
to treat the contract as a repudiated.
A warranty is a stipulation in a contract of sale breach of which may give rise to a claim
for damages but not a right to reject the goods and treat the contract as terminated
/repudiated. They are merely collateral to the main purpose of the contract.
Whether a term is a condition or a warranty depends on the construction of the
warrant. Conditions and warranties may either be
Express if agreed upon by parties at the time of making the contract.
Implied if attached to the contract by custom or by implication of the law
Implied warranties under SGA
The buyer shall have and enjoy quiet possession of the goods. This means that
where the buyer has obtained possession of goods, he has a right to enjoy them
and if his right of possession and enjoyment is disturbed, he is entitled to sue the
seller for damages.
An implied warranty is that the goods shall be free from any charge or
encumbrance in favour of any third party, not declared or known to the buyer
before or at the time when the contract is made. This warranty will not apply if
such encumbrance is declared to the buyer when the contract is made or he has
notice of it
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interest. But section 16 creates an exception to this rule of caveat emptor (Buyer be
aware) and states that where the buyer makes known to the seller the particular
purpose for which he is buying the goods and the seller specializes in the sale of
those type of goods, then there is an implied condition that the goods shall be
reasonably fit for such purpose.
BALDRY v MARSHALL, (1925) B told Marshal, a motor dealer, that he wanted to buy a
car which would be comfortable for touring purposes. Marshall recommended to him a
Bugatti car. B relied on his expert advice and bought a Bugatti car. When the car was
delivered, it was found that it was neither comfortable nor suitable for touring purposes.
B sued for the return of the purchase money. It was held that he could succeed.
4) Condition as to merchantability: Goods are said to be merchantable quality if they
are in such a condition that a reasonable man acting reasonably would after full
examination accept them. When goods are sold by description, they shall be of
merchantable quality i.e. fit for the purpose they are manufactured. It is worthwhile to
note that this implied condition does not apply where the buyer examines the goods
and he accepts them. But if such examination by the buyer does not reveal the
defects and the goods turn out to be defective when put into use, the buyer can
repudiate the contract and claim damages.
MORELLI v FITCH & GIBSON, (1928) M bought a bottle of ginger wine from the
defendants shop. When he was trying to open the bottle broke and seriously injured
his hand. Held that the plaintiff was entitled to damages as the bottle was not of
merchantable quality.
5) Sale by Sample: In a sale by sample, there is an implied condition that the bulk
shall correspond with the sample in quality and the buyer must be allowed to have a
reasonable opportunity of comparing the bulk with the sample. In addition to this,
there is an implied condition that the goods are free from any defect which would be
an apparent upon, examination, rendering them unmerchantable. But the liability is
excluded if defects should have been discovered on reasonable examination of the
52
sample.
the buyer signifies his approval or acceptance to the seller or does any other act
adopting the transaction
if he does not signify his approval or acceptance to the seller but retains the
goods without giving notice of rejection, then, if a time has been fixed for the
return of the goods, on the expiration of that time, and, if no time has been fixed,
on the expiration of a reasonable time
The general rule of Nemo dat quod non habet is that no-one can transfer what he has
not got. The nemo dat rule protects the true owner of the goods and the innocent
purchaser gets no title whatsoever. However there are exceptions to this rule under sale
of goods Act which include;
Sale in market
Overt
Seller in possession
after sale
Buyer in possession
after sale
Estoppel
EXCEPTIONS
TO THE
NEMO DAT
Special powers
of sale
Sale by a
mercantile agent
Sale under
voidable title
Sale of a motor
vehicle
acquired on HP
Estoppel
Estoppel applies in cases where the owner of the goods acts in such a way that it
appears that the seller has the right to sell the goods. As a consequence, the owner is
then prevented (estopped) from denying the facts as he represented them to be. The
third party purchaser then becomes the owner of the goods at the expense of the
original owner.
There are two distinct categories of estoppel
-
Estoppel by representation
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Estoppel by representation might arise where the owner of the goods has by his words
or conduct represented to the buyer that the seller is the true owner of the goods, or has
his authority to sell the goods
-
Estoppel by negligence
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This exception to the nemo dat rule allows a seller who, after a sale, remains in
possession of the goods or of the documents of title to them, to pass a good title to
a second buyer
Sale by a buyer in possession after sale
This exception allows a buyer in possession of the goods to pass good title even
where such a buyer has not got any such title to pass. This operates in the
following way.
Example
A buyer (X) takes possession of goods that he has agreed to buy although he has not
yet acquired title to them. The reason why he has not yet acquired title is immaterial but
might be because of a retention of title clause in the contract or because his cheque in
payment of the goods has been
dishonoured by his bank and it was a condition of the contract that title will not pass until
the goods have been paid for. He then sells the goods to Y. Y obtains good title to the
goods even though X did not himself have ownership of them.
Sale of a vehicle acquired on hire purchase
A bonafide purchaser of a motor vehicle from a person in possession under a hire
purchase agreement or conditional sale agreement obtains good title to the vehicle.
The sale of anything other than a motor vehicle is not covered under this exception
and sunset. The basis of this exception was that a dishonest person would be unlikely
to sell stolen goods or goods that he did not own in such a market. The rule seems to
reflect the high degree of supervision that was seen in established markets in the
Middle Ages. It was clearly an outdated exception and was abolished
Sale Under Special Powers
Sale by order of a court. A court may order the sale of goods for any just and sufficient
reason
4.8 Supply of goods and services
It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for
them, in accordance with the terms of the contract of sale.
Unless otherwise agreed, delivery of the goods and payment of the price are concurrent
conditions; that is to say, the seller must be ready and willing to give possession of the
goods to the buyer in exchange for the price, and the buyer must be ready and willing to
pay the price in exchange for possession of the goods
Rules as to delivery
Whether it is for the buyer to take possession of the goods, or for the seller to send
them to the buyer, is a question depending in each case on the contract, express or
implied, between the parties.
Apart from any such contract, express or implied, the place of delivery is the
seller's place of business, if the seller has one, and if not, the seller's residence.
If the contract is for the sale of specific goods, which to the knowledge of the
parties when the contract is made are in some other place, then that place is the
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place of delivery.
If under the contract of sale the seller is bound to send the goods to the buyer,
but no time for sending them is set, the seller is bound to send them within a
reasonable time.
If the goods at the time of sale are in the possession of a third person, there is no
delivery by seller to buyer unless and until that third person acknowledges to the
buyer that the third person holds the goods on the buyer's behalf.
Unless otherwise agreed, the expenses of and incidental to putting the goods
into a deliverable state must be borne by the seller.
Delivery of wrong quantity
If the seller delivers to the buyer a quantity of goods less than the seller
contracted to sell, the buyer may reject them.
If the buyer accepts the delivered goods, the buyer must pay for them at the
contract rate.
If the seller delivers to the buyer a quantity of goods larger than the seller
contracted to sell, the buyer may accept the goods included in the contract and
reject the rest, or reject the whole.
If the seller delivers to the buyer a quantity of goods larger than the seller
contracted to sell and the buyer accepts the whole of the goods delivered, the
buyer must pay for them at the contract rate.
If the seller delivers to the buyer the goods the seller contracted to sell mixed
with the goods of a different description not included in the contract, the buyer
may accept the goods that are in accordance with the contract and reject the
rest, or reject the whole.
Installment deliveries
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Unless otherwise agreed, the buyer of goods is not bound to accept delivery by
installments.
Delivery to carrier
Unless otherwise authorized by the buyer, the seller must make such contract
with the carrier on behalf of the buyer as may be reasonable, having regard to
the nature of the goods and the other circumstances of the case.
If the seller fails to act as required above and the goods are lost or damaged in
course of transit, the buyer may decline to treat the delivery to the carrier as a
delivery to the buyer, or hold the seller responsible in damages.
Unless otherwise agreed, if goods are sent by the seller to the buyer by a route
involving sea transit, under circumstances in which it is usual to insure, the seller
must give such notice to the buyer as may enable the buyer to insure them
during their sea transit. If the seller fails to give notice, the goods are deemed to
be at the seller's risk during the sea transit
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Supply of Services
Contract for the supply of a service means, a contract under which a person (the
supplier) agrees to carry out a service.
Implied terms for supply of services
Implied term about time for performance; Where, under a contract for the supply
of a service by a supplier acting in the course of a business, the time for the
service to be carried out is not fixed by the contract, left to be fixed in a manner
agreed by the contract or determined by the course of dealing between the
parties, there is an implied term that the supplier will carry out the service within a
reasonable time. What is a reasonable time is a question of fact.
Implied term about care and skill. In a contract for the supply of a service where
the supplier is acting in the course of a business, there is an implied term that the
supplier will carry out the service with reasonable care and skill
Implied term about consideration. Where, under a contract for the supply of a
service, the consideration for the service is not determined by the contract, left to
be determined in a manner agreed by the contract or determined by the course
of dealing between the parties, there is an implied term that the party contracting
with the supplier will pay a reasonable charge. What is a reasonable charge is a
question of fact
4.9 Review Questions
1. Highlight the distinct rights of unpaid seller
2. Discuss the implied conditions and warranties of a contract of sale of
goods
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Before a court will award damages, the presumed negligence must satisfy 4
requirements:
there must be a legal duty to perform or to use reasonable care
there must have been a failure to perform that duty
the plaintiff must have suffered an injury or a loss
5.2 Settlement of disputes
Negotiation
Negotiation is by far the most common form of dispute resolution. The objective of
sensible dispute management should be to negotiate a settlement as soon as possible.
Negotiation can be, and usually is, the most efficient form of dispute resolution in terms
of management time, costs and preservation of relationships. It should be seen as the
preferred route in most disputes.
Its advantages are:
Speed
Cost saving
Confidentiality
Preservation of relationships
64
65
The underlying factor in mediation is that the parties have bargaining power and
that a continuing relationship is essential after the dispute therefore trial is to be
avoided.
A neutral party, the mediator, is brought in to help the parties find a solution to a
dispute. The person controls the process while the parties control the outcome. A
mediator cannot impose a decision on the parties.
In a typical mediation session, the mediator opens the session by declaring how
the session will run, who will speak, when, for how long and the length of the
session.
The parties are requested to confirm their good faith and trust in the process and
to agree that all that will be said will be confidential and therefore inadmissible in
any subsequent proceeding. After this, parties take turn to state their views of the
dispute.
The mediator asks for clarification as may be necessary. If necessary, the
mediator may meet with the parties separately in a confidential caucus to assess
position, identify real interest, consider alternatives or help generate a possible
solution. This is called shuttle mediation.
The process may involve several sessions before a solution is arrived at.
Mediation may be of different types but three popular variations are the rights
based mediation which focuses on legal rights of the parties, the interest based
mediation which focuses on the interests and compelling issues of the dispute
and therapeutic mediation which focuses on the problem solving ability of the
parties or the emotional aspects of the dispute.
Mini-Trial
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decision the parties to the dispute have agreed, or legislation has decreed, will
be final and binding.
It is a settlement technique in which a third party reviews the case and imposes a
decision that is legally binding for both sides. Arbitration agreements are
governed in Kenya by Arbitration Act (Cap 49).
Litigation
If the use of a consensual process is not provided for in the contract and cannot
otherwise be agreed, the only alternative is litigation. Litigation will involve
preparation for trial before a judge, and may well be a lengthy, drawn-out and
costly process. Parties often agree a settlement before the case comes to court,
but in some cases not before months or even years of effort have been spent on
expensive preparatory work. Its advantages are:
persons supply or attempt to supply to or acquire or attempt to acquire from, the people
in that market the same or substitutable goods or services
The Act applies to all persons including the Government, state corporations and local
authorities in so far as they engage in trade
Competition Authority is established under the Act which has the following functions
receive and investigate complaints from legal or natural persons and consumer
bodies
promote the creation of consumer bodies and the establishment of good and
proper standards and rules to be followed by such bodies in protecting
competition and consumer welfare
recognize consumer bodies duly registered under the appropriate national laws
as the proper bodies, in their areas of operation, to represent consumers before
the Authority
carry out inquiries, studies and research into matters relating to competition and
the protection of the interests of consumers
The object of the competition Act is to enhance the welfare of the people of Kenya by
promoting and protecting effective competition in markets and preventing unfair and
misleading market conduct throughout Kenya, in order to;
promote innovation
protect consumers
bring national competition law, policy and practice in line with best international
practices
70
copyrights,
trademarks, patents, industrial design rights and trade secrets in some jurisdictions.
6.1 Reasons for embracing protection of intellectual property:
Progress and wellbeing of new creations in the areas of technology and culture. The
innovators will invariably reap their creativity benefits if the law protects them from
unscrupulous traders who take the advantage when there is a vacuum of law in
some areas. Also the government encourages creators to disclose their creations to
the public in order to promote their progress of science and useful arts which are
engines of development-investors demand this guarantee.
Reward creativity and Human endeavour which in return fuels the progress of
Humankind. This attribute is in line with bringing forth some semblance of value
creation in terms of what an individual does.
inventions in the mechanical field. Utility models are usually sought for technically less
complex inventions or for inventions that have a short commercial life. The procedure
for obtaining protection for a utility model is usually shorter and simpler than obtaining a
patent. The requirements for acquiring a utility model are less stringent than those of
patents. While thenovelty requirement must always be met, that of incentive
step or non-obviousness may be much less or even lacking. In practise,
protection for utility models is often sought for innovations of rather incremental nature,
which may not meet the patentability criteria. The maximum term of protection provided
by law for a utility model is generally shorter than the maximum term of protection
provided for a patent for invention (usually 7-10 years). The fees required for obtaining
and maintaining the right are generally lower than those for patents.
Industrial design:
This comprises any composition of lines or colours or any three dimensional forms that
gives a special appearance to a product of industrial / hand crafts. Basically industrial
design:
72
that
have
specific
geographical
origin
which
often
73
possess
Lack of awareness
Lack of IP culture
performance
evaluation
systems,
promotion,
transfer, demotion,
75
1. Industrial property:
Industrial property takes a range of forms, the main types of which include patents to
protect inventions, utility models and industrial designs (aesthetic creations determining
the appearance of industrial products). Industrial property also covers trademarks as
well as geographical indications and protection against unfair competition. Industrial
property rights are administered by the Kenya industrial property institute (KIPI) under
IPA 2001 and TM of 1957 which was amended in 2002.
Patents:
A patent is a set of exclusive rights granted by a state (national government) to an
inventor or their assignee for a limited period of time. A patent can also be defined as a
right given by a government to a person or company that has invented some new and
useful idea(s). The patent gives its owner the right to stop other people or companies
from making, using or selling products that use the invention. But after the patent ends,
the patent owner cannot prevent other people from using the idea(s). Basically patent
right usually ends after twenty (20) years. The patentee may give or grant a license to
other parties to use the invention on mutually agreed terms. The patentee may also sell
his right to the invention to someone else who will then become the new owner of the
patent.
6.3 Requirements for patenting an invention:
An invention must meet the following requirements at the time of filing of the patent
application:
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Progress and wellbeing of new creations in the areas of technology and culture. The
innovators will invariably reap their creativity benefits if the law protects them from
unscrupulous traders who take the advantage when there is a vacuum of law in
some areas. Also the government encourages creators to disclose their creations to
the public in order to promote their progress of science and useful arts which are
engines of development-investors demand this guarantee.
Reward creativity and Human endeavour which in return fuels the progress of
Humankind. This attribute is in line with bringing forth some semblance of value
creation in terms of what an individual does.
property to benefit from the property they have created, providing a financial
incentive for the creation of an investment in intellectual property.
b) Restricted open tenders: Prospective suppliers are invited to compete for a contract,
the advertising of which is restricted to appropriate technical journals or local
newspapers.
c) Selective tenders: Tenders are invited from suppliers on an approved list who have
been previously vetted regarding their competence and financial standing.
d) Serial tenders: Prospective suppliers are requested on either an open or a selective
basis to tender for an initial scheme on the basis that, subject to satisfactory
performance and unforeseen financial contingencies, a programme of work will be
given to the successful contractor, the rates and prices for the first job being the
basis of the rest of the programme.
e) Negotiated tenders: a tender is negotiated with only one supplier so that competition
is eliminated.
2 Restricted tendering:
A procuring entity may use restricted tendering if the following conditions are satisfied:
Competition for contract, because of the complex or specialised nature of goods, works
or services is limited to prequalified contractors:
The time and cost required to examine and evaluate a large number of tenders would
be disproportionate to the value of the goods, works or services to be procured
There is only a few known suppliers of the goods, works or services as may be
prescribed in the regulations
3 Direct procurement:
A procuring entity may use direct procurement as allowed under subsection (2), (3) or
(3) as long as the purpose is not to avoid competition.
A procuring entity may use direct procurement if the following are satisfied:
There is only one person who can supply the goods, works or services being procured
There is no reasonable alternative or substitute for the goods, works or services
There is an urgent need for the goods, works or services being procured
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Any other prescribed conditions for the use of the low-value procurement procedure are
satisfied
7 Specially permitted procurement procedure:
A procurement entity may use a procurement procedure specially permitted by the
authority which may include concession and design competition.
81