Business Law — 2022

KNEC Diploma in Supply Chain Management, Module I. Original examination questions with explained model answers for revision.

November 2022

Paper codes: 2903/106 (shared paper)
Time: Not shown in supplied scan
Instructions: Not shown in supplied scan

Question 1(a) — 8 marks

Explain four circumstances under which African customary law is applicable in Kenyan courts.

Model answer

  1. The matter is a civil case in which customary law can properly govern the issue; custom does not itself create a criminal offence.
  2. One or more parties are subject to, or affected by, the relevant custom and it is applicable to the dispute.
  3. The custom is not repugnant to justice and morality.
  4. The custom is not inconsistent with the Constitution or written law; superior written rules prevail.

Question 1(b) — 12 marks

A principal is generally liable for the acts of the agent. Outline six exceptions to this rule.

Model answer

An agent’s wrongdoing or disobedience of a private instruction does not automatically excuse a principal where apparent authority or vicarious liability applies.

  1. The act falls outside both actual and apparent authority and the principal does not ratify it.
  2. The contract expressly makes the agent alone liable and excludes recourse to the principal.
  3. The purported principal did not exist or could not legally be represented when the transaction was made, so valid authority could not arise.
  4. The authority had effectively ended and the third party had the notice needed to prevent continued reliance on apparent authority.
  5. The agent’s tort was outside the course of the agency/employment and no other basis for the principal’s liability exists.
  6. The third party colluded with the agent in a fraud against the principal and therefore cannot enforce the fraudulent dealing against the principal.

Question 2(a) — 10 marks

Explain five defences available to a person sued under the rule of Rylands vs Fletcher.

Model answer

  1. Act of God: an extraordinary natural event causes the escape and could not reasonably have been anticipated or guarded against.
  2. Act of an independent stranger: a person outside the defendant’s control causes the escape, without the defendant’s relevant fault.
  3. Claimant’s own fault: the escape/damage was caused by the claimant’s own conduct.
  4. Consent/common benefit: the claimant agreed to the accumulation or it was maintained for the parties’ shared benefit in circumstances excluding strict liability.
  5. Statutory authority: the activity and its unavoidable consequences were lawfully authorised, provided the defendant stayed within that authority and exercised required care.

Question 2(b) — 10 marks

In relation to the law of contract, highlight five rules that the courts apply to distinguish liquidated damages from penalties.

Model answer

  1. Substance prevails over the parties’ label; assess the clause in the circumstances when the contract was made.
  2. A sum extravagant or unconscionable compared with the greatest loss reasonably contemplated points towards a penalty.
  3. A larger sum payable merely for failure to pay an existing smaller debt points towards a penalty.
  4. One lump sum for breaches of very different seriousness may suggest a penalty, though the presumption can be rebutted.
  5. A genuine reasonable estimate of likely loss may be enforceable as liquidated damages even when exact loss is difficult to calculate; a sum whose purpose is to punish/deter rather than protect a legitimate compensatory interest is vulnerable.

Question 3(a) — 10 marks

In relation to the law for succession, explain five characteristics of a will.

Model answer

  1. Testamentary: it expresses how the maker’s estate is to be dealt with on death.
  2. Ambulatory: it does not normally transfer the property to beneficiaries during the maker’s life.
  3. Revocable: a competent testator may revoke or change it using the required legal method.
  4. Personal and voluntary: it reflects the testator’s own intentions, made with testamentary capacity and without invalidating coercion/fraud.
  5. Formally regulated: it must satisfy the applicable written or oral-will requirements to operate as a valid will.

Question 3(b) — 10 marks

Explain five ways in which the supremacy of the constitution of Kenya is manifested.

Model answer

  1. The Constitution is the supreme law of the Republic.
  2. It binds all persons and all state organs at both national and county levels.
  3. State authority may be exercised only as authorised by the Constitution.
  4. Any inconsistent law, including customary law, is void to the extent of the inconsistency.
  5. An act or omission in contravention of the Constitution is invalid and may be challenged through the proper constitutional process.

Question 4(a)(i) — 6 marks

In relation to the law of property: explain three ways in which ownership may be acquired.

Model answer

  1. Transfer: property is acquired through a lawful sale, gift or other conveyance, with any required registration/formalities.
  2. Succession: title passes through lawful administration and distribution of a deceased owner’s estate.
  3. Operation of law: ownership may arise under an applicable legal process, such as adverse possession after all statutory conditions and the necessary court/registration process are met.

Question 4(a)(ii) — 4 marks

Outline two characteristics that distinguish possession from ownership.

Model answer

  1. Possession concerns factual control coupled with the relevant intention; ownership concerns the legal title/right to the property.
  2. A possessor may have temporary or limited control, such as a tenant or bailee, while the owner retains the broader title and ultimate right to dispose of the interest subject to others’ rights.

Question 4(b) — 10 marks

Waire entered into contract with Riuki Contractors in which Riuki Contractors was to construct a house for Waire. They expressly agreed that the house should be completed within four months. By the end of the four months, Riuki contractors had only done half of the work. Waire is aggrieved and intends to file a suit against Riuki Contractors. Explain the legal principles that are relevant to this case.

Model answer

  1. The agreed four-month completion period is an express contractual obligation. Completing only half the work by that deadline is prima facie a breach, absent a valid extension or excuse.
  2. Whether Waire may terminate as well as claim damages depends on whether time was a condition/time of the essence, or the delay otherwise amounts to a repudiatory breach; a stated date alone should not be assumed to settle every termination issue.
  3. Where appropriate Waire can require completion within a reasonable final period through valid notice, or accept a sufficiently serious repudiation and engage another contractor.
  4. Recoverable damages aim to put Waire in the position proper performance would have produced, including reasonable additional completion and foreseeable delay costs proved to result from the breach.
  5. Waire must mitigate avoidable loss and account for work/payment already due. Any agreed extension, Waire-caused delay or frustration must be considered; Riuki cannot escape merely because the work became inconvenient.

Question 5(a) — 10 marks

Explain five grounds that may justify summary dismissal of an employee from employment.

Model answer

The employer must establish a valid reason and follow applicable procedural fairness requirements.

  1. Absence from work without leave or other lawful cause can amount to gross misconduct.
  2. Intoxication during working hours that makes an employee unwilling or incapable of doing the work can justify dismissal.
  3. Wilful neglect of work or careless/improper performance of a duty that must be performed carefully can justify dismissal.
  4. Abusive or insulting language or behaviour towards the employer or a person in authority can constitute gross misconduct.
  5. Knowing refusal to obey a lawful and proper command within the employee’s duties can justify dismissal.

Question 5(b) — 10 marks

Jackson sneaked into Maiba’s compound at dawn with the intention of stealing mangoes from a mango tree within the compound. As Jackson walked towards the tree, he fell into an open pit dug by Maiba to construct a latrine. Maiba found him still inside the pit, with a broken leg, where he confessed his intentions. Explain whether Maiba can successfully sue Jackson for trespass.

Model answer

  1. Trespass to land is intentional direct entry on land in another’s possession without consent or other legal justification. The claimant must show possession of the land.
  2. Jackson deliberately entered the compound secretly to steal mangoes. On the facts there was no permission, necessity or other lawful authority for entry.
  3. Trespass is actionable without proof of physical damage; Maiba need not prove that any mangoes were actually stolen. Nominal damages may be available even if no measurable loss is proved.
  4. Jackson’s broken leg does not retrospectively authorise his entry or extinguish Maiba’s trespass claim. Any distinct claim concerning the pit and an occupier’s duty would require its own legal and factual analysis.
  5. Maiba therefore has a strong trespass claim on the stated facts. Compensation beyond nominal damages requires proof of a relevant loss, and Maiba must use lawful procedures rather than self-help violence.

Question 6(a) — 8 marks

Explain four duties of an advocate in Kenya.

Model answer

  1. Exercise reasonable competence, skill and diligence when advising or representing the client.
  2. Preserve the client’s confidential information, subject to recognised legal exceptions.
  3. Act loyally, disclose/avoid improper conflicts of interest and account properly for client money and property.
  4. Uphold duties to the court and administration of justice, including honesty and not knowingly misleading the court.

Question 6(b) — 12 marks

A married woman has authority to act as her husband’s agent to take necessities on credit. Highlight six instances when such authority may come to an end.

Model answer

The question concerns the traditional doctrine of domestic agency. Marriage alone does not confer unlimited authority; express agency, apparent authority and lawful maintenance/necessity obligations must be considered on the facts.

  1. Where the necessaries have already been adequately supplied, further purchases may fall outside the implied authority.
  2. Where an adequate allowance is provided for the necessaries and the relevant supplier knows credit is not authorised, the basis for pledging the husband’s credit may cease.
  3. Express revocation communicated to the wife and to a supplier who previously relied on the authority can end further authorised credit.
  4. Separation may end the ordinary domestic inference where the husband is not legally responsible on the particular facts and no continuing actual/apparent authority or necessity is established.
  5. Death or dissolution of the marriage may end the domestic basis of authority, subject to applicable rules on notice and existing liabilities.
  6. Purchases outside the category or reasonable quantity of necessaries are outside that limited implied authority.

Question 7(a) — 12 marks

Outline six functions of the rent tribunal.

Model answer

Different statutes establish residential and business-premises tribunals. A tribunal can exercise only the powers given by the Act governing the tenancy.

  1. Determine whether a tenancy/dispute falls within the tribunal’s statutory jurisdiction.
  2. Assess or vary rent and permitted charges under the governing tenancy law.
  3. Determine disputes concerning valid termination or recovery of possession within that jurisdiction.
  4. Make authorised orders concerning repair and maintenance obligations.
  5. Determine permitted claims concerning arrears or recovery of rent.
  6. Investigate tenancy complaints and make the lawful consequential directions or orders.

Question 7(b) — 8 marks

Outline four rights that the constitution of Kenya guarantees an individual.

Model answer

  1. Right to life, subject to the Constitution’s provisions.
  2. Equality before the law and freedom from prohibited discrimination.
  3. Right to privacy, including protection against unlawful interference with the person, home and communications.
  4. Freedom of expression within constitutional limits, including the exclusions and responsibility to respect others’ rights and reputation.
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