Case One

Dr. Habtamu and Dr. Gobeze, two reputed physicians in town, are planning on importing some
health equipments from Europe for a hospital they are about to open in partnership. To this end,
they have borrowed 2 million birr, with 10% interest, from one of the private banks in Ethiopia
(hereafter ‘the Bank’). In their contract of loan all that they have expressly stated is that the two
are equally liable for the debt and they have also provided a car (worth 1 million birr) as a pledge
on which they have a joint ownership. Too better secure their debt, Dr. Habtamu has also
brought one of has business partner Ato Wassihun to stand as a guarantor for his debt. Under the
contact Ato Wassihun has signed with the Bank, he has agreed to secure the principal debt to the
extent of liability Dr. Habtamu.

Later, war is opened between the government of Ethiopia and Djibouti and all import items at the
port of Djibouti, including health equipments of Dr. Habtamu and Dr. Gobeze, is nationalized by
the government of Djibouti. This fortunate incident has led the two Doctors into a financial
distress. Cognizant of this fact, the bank directly proceeded against Ato Wassihun for the
payment of 2 million birr principal; 75,000 birr interest and 25,000 birr legal cost.

1: You being a reputed lawyer in town, Ato Wassihun has approached you and asked on the
possible defense/s he can invoke to avoid or minimize his liability. What would be your educated
response?

2: To what extent, if any, do you think Ato Wassihun is liable for the principal debt?

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Case Two

Mushirit and Mehari, planning to get married in a year time, are busy shopping house furniture
and utensils for their new home. Having some electronic equipment on their shopping list, the
couples approached Ato Birhanu, a reputed electrician in town who owns a workshop known for
locally producing a high standard electronic equipments. After a series of deliberation, Musirit
and Mehari have ordered for the production a bakery machine, a fruit mixer, cooker and a
washing machine with Ato Birhanu, each worth Ethiopian Birr 10,000; 500; 700; and 25,000,
respectively. From their discussion, the parties have reached to an agreement that all the
equipments will be made of Aluminum, to be chosen and bought by Ato Birhanu, as Aluminum
is rust-resistant in character. They have also agreed that all electric circuits to be used will be of
Germany origin. Whereas Ato Birhanu promised to finalize the production of all the equipments
and have them ready for delivery in six months time, which will due on the 10 th of April, 2012,
agreement is also reached to effect payment of the price within six months after delivery took
place.

One the date agreed for delivery, the couples went to Ato Birhanu’s workshop only to find that
what is ready for delivery is the fruit mixer and cooker, while the bakery and washing machines
are still underproduction. Being apologetic about the delay, Ato Birhanu explained to the couples
that the delay has to do with the country’s problem of foreign hard currency shortage and import
constraint, which in turn limits his access to raw materials from the domestic market. He also
promised that remaining equipments will be ready for delivery in a maximum of three months
time.

Though unpleased with the situation, the couples collected what was ready – the fruit mixer and
cooker – and went home. They however never bothered to make any sort of examination during
or after delivery, and rather simply started employing the equipments for their daily use. After a
month of effective use, the fruit mixer started rusting all over, then to find out that the material
used for its production is not Aluminum but a cheaper metal. Yet, the cooker is still functioning
very well being made of Aluminum parts as agreed among the parties.

The couples going mad with the prior laziness and now dishonesty of Ato Birhanu, want to
return everything they have received from him and terminate the relationship once and for all.

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1: Do you think the couples can succeed in cancelling the entirety of the contract? If yes, on what
ground/If no, why not?

2: What are the possible remedies the couples can avail themselves from in our law? (Exhaust all
the possible remedies and discuss the effect of each of them)

3: What possible defense/s can be raised by Ato Birhanu?

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