Faculty of economics and management science

Introduction to Business Law

Mogadishu University

Prepared by: Dr Abdurrahman Hassan wardhere

Academic year 2024-2025 -

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 Part one: Business law in general
Chapter one: Introduction to Law

Section one: Definitions and categories of law

1. Definitions

Law consists of enforceable rules governing relationships among

individuals and between individuals and their society. If you need to
understand the features of law:

1. The law is a set of general ideas.

2. When these general ideas are applied, a judge cannot fit a case to suit a rule;
he must fit (or find) a rule to suit the unique case at hand.
3. The judge must also supply legitimate reasons for his decisions.

So, how was the Law Created? The law considered in this text is “man-
made” law. This law can (and will) change over time in response to the
changes and needs of society.

Example: Grandmother, who is 87 years old, walks into a security shop. She wants
to sell her ring that has been in the grandmother’s family for 200 years. Grandma
asks the dealer, “How much will you give me for this ring?” The dealer, in good
faith, tells Grandma he doesn’t know what kind of metal is in the ring, but he will
give her $150.

Analyzing of case

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 1. Grandma needs cash to buy medicine and therefore accepts the $150.

2. The ring turns out to be solid or net gold and is really worth $25,000.

The Question is: Can Grandma get the ring back or recover the
difference between $25,000 and $150 or is she merely out of luck.

a. Ask was there a bargain for exchange.

b. Was the ring purchased in good faith without knowledge of

its value?

THIS IS WHAT WE WILL ENCOUNTER IN THIS COURSE

The word “law is generally associated with the word “rules.” And we
can provide a simple definition of law asa rule that can be enforced by
the courts.” Similarly, you can define a law as “the body of rules that can
be enforced by the courts or by other government or “a set of rules and
principles intended to guide conducts in society, primarily by protecting
persons and their property; facilitating personal and commercial
interactions; and providing mechanisms for. Law is: essential to any
society in that it provides the rules by which people and businesses work
together. The Law affects almost every function and area of business and
the difference between winning and losing in tghe business is
maintenance of law, world affairs often depends upon the ability to make
good choices from a legal perspective.”

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2. Categories of Law

The law can be categorized in several ways. First, there is the distinction
between substantive law and procedural law. Substantive law consists of
the rights and duties that each person has in society, e.g., the right to
own property or to make contracts and the duty to avoid injuring others
and to obey various laws.

Procedural law deals with the protection and enforcement of

The rights and duties of substantive law; it provides the machinery by

which these rights and duties are realized and enforced. To put it briefly,
substantive law relates to what the law is? Whereas procedural law
relates to how it is enforced?

Substantive law is divided into two fields: public law and private law

1. Public law

Public law is concerned with the conduct of government and with the
relationship between government and private individuals. Public law is
divided into categories such as constitutional, criminal, and
administrative law.

2. Private law

Private law consists of the rules governing relations between private

individuals or groups of persons. Private law which can be divided into
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Categories such as torts, contracts, business entities, business
relationships, and property rights.

3. Civil Law and Common Law system

Around the world, two basic legal systems exist, civil law and common
law. In brief, civil law emphasizes legislation, while common law
emphasizes decisions handed down by the courts. Civil law is the system
of law derived from Roman law. Its focus is on the development of a
comprehensive legislated code. Civil law developed in continental
Europe and was greatly influenced by the Code of Napoleon in 1804.
Civil law is a legal system originating in mainland Europe and adopted
in much of the world.

The civil law system is intellectualized within the framework of Roman

law, which serves as the primary source of law. The civil law system is
often contrasted with the common law system, which originated in
medieval England. Whereas the civil law takes the form of legal codes,
the common law systems historically came from uncodified case law
that arose as a result of judicial decisions, recognizing prior court
decisions as legally binding precedent

Common law is the system of law in most of the English-speaking world

and many non- English-speaking countries that were once part of the
British Empire, such as India, Pakistan, and the Caribbean. Common law
is based on precedent, the recorded reasons given by judges for their

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Decisions and adopted by judges in later cases. Conceptually, civil law
proceeds from abstractions, formulates general principles, and
distinguishes substantive rules from procedural rules. It holds case law
secondary and subordinate to statutory law.

Section two: Introduction to Business Law

1. Definition of Business law

Business law is a section of codes that is involved in protecting liberties

and rights, maintaining orders, resolving disputes, and establishing
standards for the business concerns and their dealings with government
agencies and individuals. Every state defines its own set of regulations
and laws for business organizations. Similarly, it is also the
responsibility of the business concerns to know the existing rules and
regulations applicable to them.

Business law plays a vital role in regulating business practices in a

country. Here are some points that prove why business law is so
relevant:

1. Compensation Issues

Business law is essential to handle various compensation issues in an

organization. A professional business lawyer can help companies in
settling issues related to compensation and salary management. It is the
responsibility of the lawyer to ensure that his or her client does not

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Violate compensation and benefits laws at any cost. The consequences
can be fatal in case of any disagreements.

2. Safeguard the Rights of Shareholders

Business law plays a vital role when it comes to safeguarding the rights
of a company’s shareholders. An experienced business law lawyer can
successfully handle such issues along with conflicts related to minority
shareholders, constitutional documents, and resolution by arbitration,
and more.

3. Business Formation

Business law plays the role of a foundation stone for any business
concern. Establishing business includes a lot of legal processes, leasing,
and permits. A business law lawyer is well-versed with all the relevant
regulations, and can help the concern establish its operations
successfully.

Every business concern, either large-scale or small-scale, is bound to

comply with their respective legal regulations. Here are some significant
functions of business law that can help you in understanding it better.

• Includes laws related to business ethics, substantive law,

procedural law, court system structure, and so on.
• Business law entails the taxation system for different types of
businesses.
• The level of competition and antitrust are also involved.

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 • Business law also includes regulations about employee rights and
privileges, workplace safety, overtime rules, and minimum wages
law.
• It strives to alleviate ‫ يسعى للتخفيف‬the impact businesses have on the
environment and nature. It aims to regulate pesticides,
• ‫ مبيدات حشرية‬limit air and water pollution, chemical usage, and so
on.

• Business law determines the formal process of establishment of a

business organization and regulations related to the selling of
corporate entities.

• It also includes rights assignment, drafting, and work delegations,

breach of contract, transactions, contracts, and penalties for
violation of the agreement.

• Business law defines laws related to business partnerships.

Entities, sole proprietorships, liability companies, and
corporations.

• It describes laws related to business and real property..

• Includes laws related to bankruptcy and governance of the

securities.

Business Law, also known as, Mercantile law controls the rules and
regulations associated with the business. It specifies the codes related to
business deals, the conduct of people associated with the industry, and
laws related to any organization’s rights, order, and dispute settlement.

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Mercantile law is a body of law or a legal code that deals with
international commerce, business transactions and operations like
agreements, contracts, copyrights, franchising, insurance, licensing,
patents, shipping, transport, trademarks. Mercantile law is a very general
term which encompasses the whole collection of business laws. The
most important aspect of any business transaction is the agreement
between the two parties, which is either implied or expressed.

Every country has its own rules and laws of business. Organizations
should know such laws and strictly abide by them to have a healthy and
responsible business practices. They are taught in business or law
schools and fall under civil law. It also deals with licensing and legal or
regulatory provisions and applies to companies and individuals. This is
because almost every business decision has legal consequence, including
deciding whether to incorporate a business, obtaining financing,
protecting proprietary knowledge used to develop products/services,
entering into contracts to purchase raw materials, ensuring that products
meet safety standards, disposing of plant wastes, promoting and pricing
products/service, entering into contracts to sell products/services,
warranties and after-sales service.

At all stages of business running against of the law can hurt a business,
while playing within the boundaries of the law can help the business to
succeed. For this reason, accountants, who play a key role in almost
every aspect of operations, must have a hard-working knowledge of the
law.

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The term business is understood and explained in different ways by
different people. For some,

1. Business is an activity,
2. It is a method of transacting,
3. It is a method of money making and
4. Some people argue that business is an organized activity to achieve
Certain pre- determined goals or objectives.

Another meaning of business is: the act of buying and selling of goods
and services, commerce and trade. Based on all these meanings of
business, we may define business as: gainful activity through which
various elements of society conduct exchanges of the desirable things.

Business law is a section of code that is involved in protecting liberties

and rights, maintaining orders, resolving disputes, and establishing
standards for the business concerns and their dealings with government
agencies and individuals. Every state defines its own set of regulations
and laws for business organizations. Similarly, it is also the
responsibility of the business concerns to know the existing rules and
regulations applicable to them with these definitions in mind, business
law could be defined as rules that govern business Relationships.
Business Law also known “commercial law “ in private law countries
and “is the body of laws that applies to the rights, and conducts of
persons and business engaged in commerce, products, trade, and sales”.
It is often considered

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To be a branch of civil law and deals with issues of private law in
common law countries.
Another definition business law: is a meaning of the branch of civil law
Encompass laws concerning trade, industry and commerce.

Or is the body of laws that applies to the rights includes principal and
agent contracts, carriage by land and sea, and air merchant shipping,
guarantee, marine insurance, fire, life, and accident insurance, demand
for payment of exchange and partnership. It can also be understood to
regulate corporate contracts, hiring practices, and the manufacture and
sales of consumer goods. Business law handle everyday lives through
every contractual dealing undertaken.

Many.countries have adopted civil codes that contain complete

statements of their business law, various regulatory schemes control how
commerce and business is conducted, particularly employees and
customers.

Section three: Scope and Importance of business law

1. Scope of business law

Business law covers the sales of good conduct partnership, companies,

negotiable instruments, insurance, bankruptcy, business contract carriage
of goods, arbitration all that are business law scope,
Business law falls into two distinctive areas: Business law plays a vital
role in regulating business practices in a country. Here are some points
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That prove why business law is so relevant, the purposes and functions
of business law include maintaining order, protecting rights and liberties,
establishing standards, and resolving disputes when it comes to
businesses and their interactions with individuals, government agencies,
and other businesses. Business law is a broad area of law that governs
the relationships between businesses and the people and entities with
which they interact. It includes a wide range of topics, such as contracts,
intellectual property, employment law, and corporate law.

2. The importance of business law

The importance of business law can be summarized as follows:

• It protects the rights of businesses and their stakeholders.

Business law ensures that businesses are able to operate within the law
and that their rights are protected. It also protects the rights of
employees, consumers, and other stakeholders.

• It helps businesses to resolve disputes.

When businesses have disputes with each other or with other parties,
business law provides a framework for resolving those disputes. This
can help to avoid costly and time-consuming litigation.

• It helps businesses to comply with regulations.

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Business law sets out the legal requirements that businesses must
comply with. This includes laws on taxation, employment,
environmental protection, and product safety.

• It promotes fair and ethical business practices.

Business law helps to ensure that businesses compete fairly and

ethically. This can help to create a level playing field for businesses and
protect consumers.
• It provides a framework for business growth and innovation.

Business law can help businesses to grow and innovate by providing a

stable and foreseeable legal environment. This can encourage businesses
to invest and take risks.

In short, business law is essential for businesses of all sizes to operate

effectively and ethically. By understanding business law, businesses can
protect their rights, resolve disputes, comply with regulations, and
promote fair and ethical business practices. Here are some specific
examples of how business law is important:

• A contract law governs the formation and enforcement of

contracts. This is important for businesses because it ensures that
they can enter into legally binding agreements with their
customers, suppliers, and other partners.
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 • Intellectual property law protects businesses' creations, such as
trademarks, copyrights, and patents. This is important because it
prevents others from copying or using a business's intellectual
property without permission.

• Employment law governs the relationship between businesses and

their employees. This is important for businesses because it
ensures that they comply with the law when hiring, firing, and
compensating employees.

• Corporate law governs the formation and operation of

corporations. This is important for businesses because it helps
them to raise capital, protect their assets, and minimize their
liability. Business law is a complex and ever-changing field.
However, by understanding the basics of business law, businesses
can protect themselves and their stakeholders and operate more
effectively.

Section four: Source of Business law

The main Sources of Business law are:

1. Principles of Islamic religion

Islam is a comprehensive religion. It does not divide human acts into

sacred and profane; Islam refuses to distinguish between worldly affairs
and affairs of the next world. The Qur'an and the Sunnah the two main
sources from which all others rules and details are derived contain
statements not only on matters of faith and ritual worship but
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Also on worldly affairs. Today there is a growing interest in the study of
Islamic commercial and financial transaction not only in the Muslim
world but also among non-Muslims

3. Constitution

The Constitution is the foundation law from which all other laws draw
their power. The Constitution is also the highest source of law. In turn;
legislation is passed by Parliament with in compliance with the
Constitution. Es, a constitution is the foundation law of a country. It is
the supreme law of the land, and all other laws must be consistent with
it. The constitution establishes the basic structure of government, defines
the powers of the different branches of government, and protects the
rights of the people. The constitution is often called the “supreme law”
because it is the highest source of legal authority in a country.

All other laws, including statutes passed by the legislature and

regulations issued by the executive branch, must be consistent with the
constitution. If a law is found to be inconsistent with the constitution, it
is invalid. The constitution also protects the rights of the people. These
rights may include the right to free speech, and the right to a fair trial.
The constitution ensures that the government cannot violate these
rights without due process of law.

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The constitution is a living document that can be amended over time.
However, amendments are difficult to pass, which helps to ensure that
the constitution remains stable and does not change too quickly. The
constitution is an important part of any democracy. It provides a
framework for government that protects the rights of the people and
ensures that the government is accountable to the people.

3. Somali Legislations

There are in Somalia sources of law such as Somali mercantile law no.
81 of 14 December 1972 which replaced in January 1973 and the
Somalia weights & measures ordinance no 9 of 31 July 1959. The
Somali civil code, which covers, among other things, laws relating to
contracts, unless otherwise provided in commercial code, the provisions
of the civil code shall apply to the status and activities of persons and
business organizations carrying on a trade. Somali mercantile law is the
body of law that governs commercial transactions in Somalia. It is based
on a combination of Islamic law, customary law, and statutory law.
Islamic law, or Sharia, is the primary source of law in Somalia. It
governs all aspects of life, including commercial transactions. However,
Sharia is not a codified legal system, and there is no single interpretation
of it. As a result, there is some uncertainty about how Sharia applies to
commercial transactions. Statutory law is the third source of mercantile
law in Somalia. Statutory law is laws that have been passed by the
legislature. It

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Is the most recent source of law, and it takes precedence over Islamic
law and customary law.

The Commercial Code regulates a wide range of commercial activities,

including contracts, sales, carriage of goods, and bankruptcy. In addition
to the Commercial Code, there are a number of other statutory laws that
govern commercial transactions in Somalia. These laws include the Civil
Code, the Penal Code, and the Tax Code.

The Somali mercantile law is a complex and evolving system, it can be

difficult to determine the applicable law in a particular case.

However, the Somali courts are generally fair and impartial, and they
will apply the law in a way that is consistent with the principles of
justice.

Here are some of the key provisions of the Somali mercantile law:

• Contracts: The Commercial Code regulates the formation and

enforcement of contracts. It requires that contracts be in writing
and signed by both parties. The code also sets out rules for
interpreting contracts and for resolving disputes arising from
contracts.

• Sales: The Commercial Code regulates the sale of goods. It sets

out rules for the formation of sales contracts, the transfer of
ownership of goods, and the liability of sellers for defects in goods.

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 • Carriage of goods: The Commercial Code regulates the carriage of
goods by sea. It sets out rules for the liability of carriers for loss or
damage to goods.

• Bankruptcy: The Commercial Code regulates bankruptcy. It sets

out rules for the declaration of bankruptcy, the appointment of a
trustee, and the distribution of assets to creditors.

4: Customs and business usages,

Customary law is also an important source of mercantile law in Somalia.

Customary law is the body of law that has developed over time through
the practice of the people. It is often unwritten, but it is still binding on
the people.

Customs and usage play an important role in regulating business

transactions. Most of the business customs and usage have been already
codified and given legal sanctions in Somalia Some of them have been
ratified by the decisions of the competent Courts of law. When a custom
is accepted by a court and is incorporated in a judicial decision, it
becomes a legally recognized custom, Custom in law is the established
pattern of behavior that can be objectively confirmed within a particular
social setting. Commercial Usage means rules of conduct with clear
contents which have been established between parties and repeated
many times over a long period, and which are taken for granted and
recognized by the commercial parties as fixing their rights and
obligations in their activities.

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Here are some additional tips for doing business in Somalia:

• Build relationships: Somalis value personal relationships. It is

important to take the time to get to know your business partners
before you start doing business with them.

• Be patient: Things can move slowly in Somalia. Be patient and

don’t expect everything to happen overnight.

• Be flexible: Things don’t always go according to plan in Somalia.

Be flexible and be willing to adapt to change.

• Be persistent: Don’t give up easily. If you are persistent, you will

eventually succeed in doing business in Somalia.

There are many different aspects of business usage, but some of the
most important include:

• Communication: Businesses need to be able to communicate

effectively with each other, both internally and externally. This
includes using clear and short language, as well as understanding
the different types of communication that are used in the business
world, such as email, phone calls, and meetings.

• Terminology: Businesses use a lot of specialized terminology that

can be confusing to outsiders. It is important to be familiar with the
most common terms so that you can communicate effectively with
other businesses.
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 • Customs: Businesses also have their own customs and practices tha
can be different from other cultures. For example, in some cultures
it is customary to exchange business cards when meeting someone
for the first time. In other cultures, this is not done.

By understanding the different aspects of business usage, you can

improve your communication and interactions with other businesses.
This can help you to build relationships, close deals, and succeed in the
business world.

Here are some additional tips for using business usage effectively:

• Be clear and concise: When communicating with other businesses,

it is important to be clear and concise. Avoid using jargon or
technical terms that your audience may not understand.
• Be professional: Always use professional language and avoid using
slang or informal terms.
• Be respectful: Be respectful of the customs and practices of other
businesses.
• Be aware of cultural differences: Different cultures have different
business customs and practices.
• Be aware of these differences and adapt your communication
accordingly.

Chapter two: Traders and Handicraftsmen

Section one: definitions and activities

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 1. Definitions of traders and activities

Traders are Persons who professionally and for gain carry on any of the
following activities shall be deemed to be traders:
2. Purchase of movables or immovable with a view to re-selling
them either as they are or after alteration or adaptation;
3. Purchase of movables with a view of letting them and for lease
4. Warehousing and storage activities;
5. Exploitation of mines, including prospecting for and working of
mineral oils; exploitation of quarries not by handicraftsman;
exploitation of salt pans;
6. Conversion and adaptation of goods, such as foodstuffs, raw
materials or semi-finished products not by handicraftsmen;
7. Building, repairs, maintaining, cleaning, painting or coloring
movables not by handicraftsmen;
8. Carriage of goods or persons not by handicraftsmen;
9. Printing and engraving and works connected with photography
or film making not by handicraftsmen;
10. Capturing, distributing and supplying water;
11. Producing, distributing and supplying electricity, gas,
compressed air including heating and cooling.
12. Operating places of entertainment or radio or television
stations.
13. Operating hotels, restaurants, bars, cafes, inns,

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 14. Hairdressing establishments not operated by handicraftsmen
15. Public baths and toilets;
16. Publishing in whatever form, and in particular by means of
printing, engraving, photography or recording;
17. Operating news and information service;
18. Operating travel and publicity agencies;
19. Operating business as an agent, broker, supply dealer or
commercial agent;
20. Operating a banking and money changing business, and
operating an insurance business.

Business law shall not apply to handicraftsmen.

Handicraftsmen are persons who carry on an independent activity, who

live mainly on their own manual work, who may carry on their activity
with the assistance of members of their family and of not more than
three employees or apprentices and who by such material only as is
necessary for carrying out their activities, without setting up stocks.
Handicraftsmen may use mechanical power; Handicraftsmen are subject
to the provision of any special law relating to their activities.

Incapable Persons for trade

Person’s incapable under the civil code may not carry on any trade.
Any person or business organization has the right to carry on any

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Trade in accordance with the provisions regulating such trade; Particular
persons may be restricted or prevented from acting as traders or from
carrying on a particular trade by legal provisions setting up prohibitions
or incompatibilities. The Law in respect of particular trades may impose
specific requirements as to age, qualifications, sex, nationality or license

Section two: Traders and non-traders’ persons

1. Commercial employees

Commercial employees are persons who are bound to a trader by a

contract of employment and who assist the trader by doing work of a
non-manual nature as a salesman, secretary, accountant, guardian,
inspector or director. Commercial employees are not traders. Without
prejudice to the provisions of this code, the provisions of the labor code
relating to contracts of employment shall apply to commercial
employees. Commercial employees may act as agents by express or tacit
agreement; the revocation of the power of agency shall not result in the
cancellation of the contract of employment. The employee in charge of
the sales in a store shall be deemed to have power of agency for the
purpose of selling or receiving goods, which come within the normal
business activities of stores of such nature.

2. A manager

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Manager is a person who has been authorized, expressly or tacitly to
carryout acts of management and to sign in the name of the trader,
manager is not a trader. Where a manager has been appointed, the trader
shall cause an entry to be made in the commercial register. The manager
shall have power to act by virtue of his appointment, in his relations with
third parties; the manager shall be deemed to have full power to carry
out all acts of management connected with the exercise of the trade,
including the power to sign a negotiable instrument. Unless expressly
authorized to do so, he may not sell or pledge immovable property.

3. Commercial representative

A commercial representative is a person, not domiciled at the place

where the head office of the business is situated and bound to a trader by
a contract of employment, who is entrusted by the trader with visiting
clients in a specified area and offering to them goods and services in the
name and on behalf of the trader. Contracts entered into by commercial
representatives shall become effective without confirmation by the
trader. Commercial representatives are not traders

4. Commercial Agents

A commercial agent is a person or business organization, not bound to a

trader by a contract of employment and carrying out

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Independent activities, who is entrusted by a trader with representing
him permanently in a specified area and dealing or making agreements
in the name and on behalf of the trader. Contracts entered into by a
commercial agent shall become effective without confirmation by the
trader. Commercial agent normally acts as agent and may act as broker.

5. Commercial Brokers

Commercial broker is a person or business organization who,

independently, professionally and for gain, brings parties together for the
purpose of their entering into an agreement such as a contract of sale,
lease, insurance or carriage. Commercial broker is a trader, regardless of
the parties he brings together and of the nature and object of the contract
for the completion of which he acts as an intermediary. Commercial
broker shall, where the parties have agreed to enter into a contract,
inform both parties of the terms of the proposed contract. The proposed
contract shall not become effective unless it is confirmed by both
parties.

6. Commission Agents

A commission agent is a person or business organization who,

independently, professionally and for gain, undertakes to buy or to sell
in his name, but on behalf of the principal, goods, movables or any other
thing of a similar nature, or to enter in his name but on

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Behalf of the principal into a contract of carriage of goods. A
commission agent is a trader, regardless of the parties and of the
nature and object of the contract.

Requirements to Issue Commercial License

The following documents are required prior the issuance of commercial

license by the ministry of commerce:

1. Application to obtain a license

2. Statement of registration signed by the attorney-general

3. Articles of association,

a) Fixed asset
b) Bank balance
c) Police testimony
d) Tax clearance certificate
e) Membership registration of chamber of commerce

No person shall engage in any commercial activity unless registered in

the commercial register. Registration shall be effective from the
date of entry of the commercial register.

Cancellation of Registration

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The ministry of commerce shall decide to cancel the registration
after being aware of the fact that either the business person has
ceased to operate his business or there is a lawful decision
prohibiting him to carry on his business. Any registered person
may apply for the registration to be cancelled within two months
from his ceasing to carry on trade.

The heirs of a deceased trader shall apply for the registration to

be cancelled within two months from the death. Where the heirs
carry on the trade under joint ownership, they shall apply for a
new registration to be entered. Where the joint ownership is
dissolved the entry shall be cancelled and the person to whom
the business is assigned shall apply for a new registration.
Where a business organization is dissolved and wound-up, the
liquidators shall apply for the registration of the business
organization in the commercial register to be cancelled. The
business organization shall have no legal personality after
cancellation has been published in the official commercial
bulletin. The business person whose registration is cancelled
shall get upon his request a certificate of cancellation of
registration on payment of the fee prescribed by the regulations.

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Chapter five: Business partnership.

Section one: definition of partnership and its advantages

1. Definition of partnership

Partnership is a legal arrangement between two or more people who

agree to share the profits and losses of a business. The partners can be
individuals, businesses, or other organizations. Partnerships are often
formed to pool resources, expertise, and skills to achieve a common
goal. There are two main types of partnerships: general partnerships and
limited partnerships. In a general partnership, all partners are jointly and
severally liable for the debts and obligations of the partnership. This
means that each partner is liable for the entire amount of the
partnership’s debts, even if they were not personally involved in the
transaction that gave rise to the debt. General partners have the same
rights and responsibilities as partners in a general partnership. Limited
partners, on the other hand, are only liable for the amount of their
investment in the partnership. Partnerships can be formed in any country
that recognizes the legal concept of a partnership. However, the specific
laws governing partnerships vary from country to country.

Here are some examples of partnerships definition

1 ) Partnership is the relation which subsists between persons carrying

on a business in common with a view to profit.

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2 ) The standard partnership is an organization established by
individuals to pursue some business activity.

3 ) Also Partnership is the relationship between persons who have

agreed to share the profits of a business carried on by all or any of them
acting for all.

A partnership cannot be formed with more than ten persons in banking

and twenty persons in other types of business. A partnership with
persons exceeding the above limits must be registered under a company
law. Each partner shall make a contribution, which may be in money,
debts, other property or skill. In relation to this definition, it should be
noted that:

1) The nature of the relationship is a contractual one, Partners enter

into the agreement on the terms that they themselves have
negotiated and agreed to. As a consequence, they are contractually
bound by those terms, as long as they do not conflict with the
express provision’s contractual terms.

2) It is a requirement that a business be carried on

3) Any business must be carried out in common

4) The business must be carried on with a view to profit

2. Advantages of forming a partnership

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Here are some of the advantages of forming a partnership:

• Increased resources: Partnerships can pool the resources of two or

more individuals or businesses, which can give them a competitive
advantage.

• Shared expertise: Partnerships can bring together people with

different skills and expertise, which can help them to achieve their
goals more effectively.

• Increased capital: Partnerships can raise more capital than a single

individual or business, which can help them to finance their
operations.

• Shared risk: The partners in a partnership share the risks of the

business, which can reduce the risk for each individual partner.

Here are some of the disadvantages of forming a partnership:

• Increased liability: In a general partnership, all partners are jointly

and severally liable for the debts and obligations of the
partnership. This means that each partner is liable for the entire
amount of the partnership’s debts, even if they were not personally
involved in the transaction that gave rise to the debt.

30
 • Disagreements: Partnerships can be difficult to manage, as there
are often disagreements between the partners. These
disagreements can lead to conflict and even the dissolution of the
partnership.

• Lack of continuity: If a partner dies or becomes incapacitated, the

partnership may be dissolved. This can disrupt the business and
make it difficult to continue operations.

Overall, partnerships can be a good way to achieve business goals.

However, it is important to weigh the advantages and disadvantages
carefully before forming a partnership. Here are some examples of
partnerships:

• A law firm that is formed by two or more lawyers.

• A real estate investment firm that is formed by a group of
investors.
• A consulting firm that is formed by a group of experts in a
particular field.
• A non-profit organization that is formed by a group of people who
share a common goal

Section two: formation of partnership

A partnership can be formed in two ways:

• Express partnership: This is a partnership that is created by an

express agreement between the partners. The agreement can be
31
 Written or oral. If the agreement is oral, it is important to have
clear and concise discussions about the terms of the partnership.

• Implied partnership: This is a partnership that is created by the

conduct of the parties. In other words, the partners may not have
explicitly agreed to form a partnership, but their actions may
indicate that they have done so. For example, if two people work
together to run a business and share the profits and losses, they
may be considered to be implied partners.

The formation of a partnership does not require any government filing or

registration. However, there are some steps that the partners should take
to formalize the partnership and protect their interests. These steps
include:

• Drafting a partnership agreement: A partnership agreement is a

written document that sets forth the terms of the partnership. The
agreement should cover issues such as the contributions of the
partners, the sharing of profits and losses, the management of the
partnership, and the dissolution of the partnership.

• Registering the business name: If the partnership will be using a

business name, it is important to register the name with the
appropriate government agency. This will help to prevent other
businesses from using the same name.

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 • Obtaining an employer identification number (EIN): An EIN is a
tax identification number that is assigned to businesses by the
Internal Revenue Service (IRS). It is important to obtain an EIN
for the partnership so that it can file taxes and open bank accounts.

• Obtaining business licenses and permits: The partners may need to

obtain certain licenses and permits from the government in order
to operate the business. The specific licenses and permits that are
required will vary depending on the type of business and the
location of the business.

By taking these steps, the partners can formalize the partnership and
protect their interests.

Here are some additional tips for forming a partnership:

• Get legal advice. It is important to consult with an attorney who is

familiar with partnership law to ensure that the partnership
agreement is properly drafted and that the partnership is formed in
accordance with the law.

• Choose the right partners. The partners should be people who share
the same goals and objectives for the business. They should also be
people who can work together effectively and who are trustworthy.

33
 • Set clear expectations. The partners should have clear expectations
about their roles and responsibilities in the business. They should
also have clear expectations about the sharing of profits and losses.

• Put everything in writing. It is important to put all of the terms of

the partnership agreement in writing. This will help to avoid
disputes in the future. There are no specific legal requirements
governing the formation of a partnership. Partnerships arise from
the agreement of the parties involved and are governed by the
general principles of contract law.

Therefore, may be made by deed, in writing or by word of mouth. Such

agreement May even be implied from the conduct of the parties. Any
person who has the capacity to enter into a contract can be a partner;
Joint owners may agree to create a partnership for the management of
the property jointly owned. It is usual for the terms of the partnership to
be set out in written form. The document produced is known as the
‘articles of partnership’. The parties involved, no doubt after some
negotiation, decide what they wish to be specifically included, in the
articles. The partners shall draw up the partnership agreement, and it
shall contain:

1) The name, address and nationality of each partner

2) The firm-name,

3) The head office and branches, if any;

34
 4) The nature of business;

5) Place of business and the business address;

6) Duration of the partnership and the mode of dissolution;

7) The amount of capital to be contributed by each partner,

8) The share of profits to be taken by each partner;

9) The mode of management.

10) The powers of the partners;

11) Term on which a partner can retire;

12) Expulsion of partners; and

13) Introduction of new partners.

Registration of Partnerships

1) The registration of a partnership is not compulsory but optional

2) Where a partnership is to be registered, the following statement

must be released to the commercial registrar

a) The firm-name;

b) The place or principal place of business of the firm;

c) The branch names, if any;

35
 d) The date when each partner joined the firm

e) The names in full and permanent addresses of the partners,

f) The duration of the firm.

3) The statement must be signed and verified by all the partners or

their agents specially authorized on this behalf. Unregistered firms
cannot file suits or claim set-off.

Section three: Rights and Duties of Partners

Partners are bound to carry on the business of the firm to be greatest

common advantage, to be just and faithful to each other, and to render
true accounts and full information of all things affecting the firm to any
partner or his legal representative. Every partner shall indemnity the
firm for any loss caused to it by his fraud in the conduct of the business
of the firm partner is not entitled to receive remuneration for taking part
in the conduct of business. The following rules apply as regards the
management of a firm

1. Every partner has a right to take part in the conduct of the

business;

2. Every partner is bound to attend carefully to his duties in the

conduct of the business;

3. Any difference arising as to ordinary matters connected with

the business may be decided by a majority of the partners,

36
4. And every partner shall have the right so express his opinion
before the matter is decided but no change may be made in
the nature of the business without the consent of all the
partners;

5. Every partner has a right to have access so and to inspect and

copy any of the books of the firm

6. The partners shall share all profits, which by their nature are
partnership profits.

7. Every partner may require that the profits be distributed

immediately after approval of the management report.

8. Every partner shall have an equal share in the profits and

losses, irrespective of his contribution. If the agreement
specifies either the share in the profits or the share in the
losses, this provision shall apply equally to the share of
profits and losses.

9. The partners may require a report on the management to be

prepared at the end of each year. Any provision in a
partnership agreement for reports to be submitted at intervals
exceeding twelve months shall be of no effect.

37
Section four: Property and Creditors of the
Partnership

1. Property of the Partnership

Property, debts and rights brought into or acquired by the partnership

shall belong to the partners in common under the terms of the
partnership agreement. No partner may use partnership property against
the interests of the partnership or so as to prevent his co-partners from
using such property in accordance with their rights.

2. The creditors In-coming Partners

The creditors of the partnership may claim against partnership assets.

They may also claim against the personal property of the partners who
shall, be jointly and severally liable to them for the obligations of the
partnership. A partner who is sued on his personal property may require,
as though he were a guarantor, that the creditor first distain the property
of the partnership. A person who is a debtor of the partnership may not
set-off a debt against one of the partners.

A new partner can be introduced only with the consent of all the
partners. The share of profits which a new partner is entitled to get is
fixed at the fines he becomes a partner. He is liable for all the debts of
the firm after

38
The date of his admission but he is not responsible for any act of the
firm done before he became a partner, unless otherwise agreed.

Section five: Dissolution and Winding-up of Partnership

1. Concept of Dissolution of a partnership and its grounds

Dissolution means is the end of a firm by the breakup of the relation of

partnership between all the partners. A partnership may be dissolved any
time with the consent of all the partners of Partnership.

But the Partnership shall be dissolved in following grounds

1) If the one of the partners dies or is no longer able, under the law, to
be a partner

2) Partnership shall be dissolved where a partner is declared

bankrupt. The partnership may by agreement continue as between
the remaining partners, or with the heirs or representatives of the
deceased, in cable or bankrupt partner.

3) The happening of an event, which makes the business of the firm

unlawful, may dissolve a partnership.

4) Where a partner determinedly breaches the partnership agreement;

5) Where a partner engages in activity prejudicial to the business;

6) Where a partner engages in activity prejudicial to the business;

39
 2. Expulsion of a Partner and paying out Partner Leaving

The court may order the expulsion of a partner for good cause and the
partnership shall continue as between the remaining partners.

Where a partner leaves a partnership and partnership continues 25

between the other partners, the rights of the partner who has left shall be
settled in cash, on the basis of the value of his rights on the bay when he
leaves the partnership. A partner who leaves the partnership shall share
in the profits and losses arising from dealings completed or outstanding
on the day when he leaves.

Where a partner has given notice to dissolve, his partners may prevent
dissolution by paying out his share and the partnership shall continue as
between the other partners.

3. Powers of Managers and Liquidators after Dissolution

A. Powers of Managers

The managers shall retain their powers on dissolution until they have
made arrangements for the dissolution. During dissolution, they may
only exercise such powers as are necessary to complete the dissolution.
After dissolution, one or more liquidators, appointed under the
partnership agreement or by all the partners, shall carry out the winding-
up. Failing the agreement of the partners, the court shall
appoint liquidators.

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B. Power of the Liquidators

The liquidators shall have the same duties and responsibilities as

managers. The appointment of liquidators may be revoked by the
decision of all the partners, or by the court at the request of one partner.
The managers shall hand-over to the liquidators the property of, and
documents relating to, the partnership and render an account of their
management up to the date of handing over. The liquidators shall draw
up an inventory of the assets and liabilities of the partnership. The
liquidators shall take all steps necessary to complete the winding-up of
the partnership. The liquidators may sell the property of the partnership,
represent the partnership in legal proceedings and may comprise or refer
to arbitration any matters in issue. The liquidators may not undertake
new business in the name of partnership but may complete business
already started.

C. Mode of Settling Accounts after Dissolution

The settlement of accounts between partners upon dissolution is to take

place in the manner provided for in the partnership agreement. Subject
to such an agreement, Losses are to be paid first out of profits, next out
of capital, and.

Lastly, if necessary, by the partners individually in the proportions in

which they were entitled to share profits. Capital deficiency is to be
treated as loss and is to be borne by the partners in proportion to

41
The profit-sharing ratio. The assets of the firm including any sums
contributed by the partners to make up deficiencies of capital shall
be applied in the following order:
a) In paying the debts of the firm to third parties,

b) In paying to each partner ratably ‫ بتقييم‬what is due to him from the

firm for advances as distinguished from capital.

c) The remains, if any, shall be divided among the partners in the

proportions in which they were entitled to share profits.

D. Sale of Goodwill and Rights of Buyer of Goodwill after

Dissolution

In settling the accounts of the partnership after dissolution, the goodwill

shall, subject to contract between the partners, be included in the assets
and it may be sold either separately or along with other property of the
partnership.

The purchaser of the goodwill gets the exclusive rights to represent

himself as carrying on the old business. He also gets the exclusive
right to use the name of the old partnership.

Chapter six: concept of business corporation

Section one: concept of corporation

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Corporation may be defined as: an artificial unity of entity normally
consisting of a group of individuals, which the law treats as having a
common will. And therefore, capable of holding rights and duties.

In other words, a corporation is a purely artificial entity, treated by the

law as a legal person. One of the root principles of the corporation is
immortality, for exists independently of its members, unless it is brought
to an end in certain specific ways. This at once distinguishes it from the
individual person, whose span of life is restricted and uncertain. We can
distinguish two main classes of corporation – the corporation sole and
the corporation collective.

Corporation is a legal entity that is separate and distinct from its owners.
Corporations enjoy most of the rights and responsibilities that
individuals possess

Section two: kinds of Corporation

1. Corporation Sole

Corporation sole consist of a single individual – having, however, a legal

personality that completely difference from the personality of the human
being who, at any one particular time, makes up the corporation. For
example, the “Bar fiat” is corporation sole, since the legal personality of
the “Bar fiat” Hassan existence which dates back to the original
foundation and looks forward continuously to the future until, for any
reasons, it is dissolved. The office of “Bar fiat” may become vacant
upon
43
The death of manager, but the corporation is only in abeyance until a
new manager is appointed, and its legal personality is continuous.

2. Corporation collective

A corporation is a legal entity that is separate and distinct from its

Owners. Corporations enjoy most of the rights and responsibilities that
individuals possess they can enter contracts, loan and borrow money, sue
and be sued, hire employees, own assets, and pay taxes. Some refer to it
as a “legal person.”

An important element of a corporation is limited liability, which

means that shareholders may take part in the profits through dividends
and stock appreciation but are not personally liable for the company’s
debts. Corporations are not always for profit.

Section three: The Creation and reasons of a Corporation

1. The Creation of a Corporation

A corporation is created when it is incorporated by a group of

shareholders who have ownership of the corporation, represented by
their holding of common stock, to pursue a common goal. A
corporation’s goals can be for-profit or not, as with charities. However,
the vast majority of corporations aim to provide a return for its
shareholders.

Shareholders, as owners of a percentage of the corporation, are only

responsible for the payment. A corporation can have a single shareholder
or several. With publicly traded corporations, there are often thousands

44
Of shareholders. Corporations are created and regulated under corporate
laws in their jurisdictions of residence.

The process for forming a corporation varies according to the state you
do business in and the state you live in. For the most part, you’ll need to
file articles of incorporation with the state and then issue stock to the
company’s shareholders.

The shareholders will elect the board of directors in an annual meeting.

Since corporate personality is acquired only by state recognition, it can

be conferred only by an authoritative document, having the state’s
approval. The law, therefore, prescribes that a corporation can be created
by one of the following: A special statute where by a special act of a
parliament creates corporations to fulfill public functions, e.g. the post
office corporation. A general act of parliament which grants the privilege
of incorporation to all groups obey with certain requirements e.g., the
companies’ acts which govern the formation of companies, and the
building societies act governing building societies.

2. Reasons of a corporation

The primary reasons for the creation and recognition of corporation is

commercial and economic purpose. Under the protection of the
corporation, large-scale enterprises increase for centuries, having
perpetual succession undisturbed by the death of individual members.
The Continuity of the corporation is not affected, whether old members
die,

45
Existing members or new members are added. The main point to grasp
is that the collective personality of the corporation is totally distinct
from that of its members operating the corporation. There are two
distinct lives, the juristic life of the corporation and the life of the
individual members. Clearly, although a corporation is a “person” in the
eyes of the law, it cannot marry or be imprisoned, as an individual can,
so it is frequently referred to as a “fictitious person”. Because of the
artificiality of its personality, the legal capacity of a corporation differs
in some respects from that of ordinary individuals. The distinction
between the personality of a corporation and personality of the
individuals making up the corporation was clearly laid down in the case
of Salomon. Salomon and company LTD (1897). Salomon incorporated
his business as a limited company, which consisted of seven members of
his family and himself. He held all the shares except even, and also
debentures to the value of £10,000, representing a loan which the
company borrowed from him. The debentures entitled him to a first
charge on the assets of the company. Thus, when the company went into
liquidation, Salomon claimed that, as a debenture holder, he was a
“secured” creditor. The other creditors claimed that Salomon and the
company was the same person, and that a man could not owe money to
himself. The House of Lords, however, held that a company, once
incorporated, had a legal existence of its own, which was quite
independent of the existence of any individual member.
46
Chapter seven: Companies and Classes of company

Section one: Concept Companies

The major status governing companies is the companies’ act which

combines all previous statutes relevant to company law. One definition
of a company is that it is: an association of members whose shares in the
property of the company. Another way of defining it is: an association of
individuals for purposes of profit, possessing a common capital
contributed by the members composing it, such capital being commonly
divided in shares of which each member possesses at least one, and
which are transferable by the owner. A limited company is one in which
the liability of its members is limited by the memorandum of association
to the amount, if any, unpaid on the shares respectively held by them.
Limited companies are often referred to in the press, on radio and TV
and in everyday speech as “firms”. You should remember, however, that
in the language of the law, a firm is a partnership or a one-man business,
not a limited company.

Section two: Classes of company

As a result of the company’s act, the following four classes of company

now exist:

1. Public limited companies (PLCS)

47
Public limited company, or ‘PLC’ for short, is a company that is legally
allowed to offer its shares for sale to the public. They don’t have to offer
those shares to the public, but they can.

There are some specific requirements for a PLC which must be met:

❖ The minimum number of shareholders must be two a private

limited company only needs one shareholder

❖ Accounts must be filed within 6 months of the year end (the limit
is 9 months for a private company)

❖ The Company Secretary must be a qualified person (in a private

company the secretary does not need to be qualified)

❖ The minimum number of Directors is two (just one needed for a

private company)

2.Private companies limited by shares

A private company limited by shares is a class of private limited

company incorporated under the laws of certain Commonwealth
countries, and the It has shareholders with limited liability and its shares
may not be offered to the general public, unlike those of a public limited
company. “Limited by shares” means that the liability of the
shareholders to creditors of the company is limited to the capital
originally invested.

3. Private companies limited by guarantee

48
 Companies limited by guarantee without a share capital are widely
used for charities, community projects, clubs, societies and other
similar bodies. Most guarantee companies are not-for-profit
companies, that is, they do not distribute their profits to their
members but either retain them within the company or use them for
some other purpose. Most such companies need their articles to be
drafted for that particular organization, The main reason for a charity,
community project, etc., to be a company limited by guarantee is to
protect the people running the company from personal liability for
the company’s debts, just as a business may be set up as a company
limited by shares for the same reason.

A company limited by guarantee Is a private company which has the

liability of its members limited by the memorandum of Association to
such amount as the members may respectively in that way guarantee to
contribute to the assets of the company in the event of its being wound
up. Important examples are trade associations and organizations formed
to promote charity, education, science, etc. they do not normally have a
share capital, as they are not formed for profit, but they acquire the
benefits of incorporation by registration.

4. Unlimited companies

These are rare, and do not call for a great deal of discussion. Note that
the word “limited” is not used as the last word in the name of the
company,

49
And that the liability of the members is unlimited. Unlimited company
may be reregistered as a limited company.

Section three: distinction of company legal terms

1. between directors and shareholders of company

It important to recognize that ownership and management of a company

can be separate even though the individuals concerned are physically the
Same.

Shareholders as owners of the equity or share capital of the company

have the right to freely transfer their debentures of the company. But
directors can be removed from the board of a company without their
consent. Directors cannot vote or participate in a board meeting
discussion to consider a matter in which they have an interest unless
they have given prior notification of this interest. Generally, directors
may consider whatever matter they consider necessary to discussed at a
board meeting and they reach decisions by a simple majority vote. In
many small companies, e.g. husband/wife/partner or family companies,
the directors and shareholders are the same. In this case it is important to
realize that the above provisions of the company’s act apply.

2. Between partnership and corporation

We can now note the following important difference between a

partnership and a corporation:

50
Partnership has no legal personality; when a corporation has a legal
personality of its own. All partners share in the management, unless it is
agreed otherwise. The management of a corporation is left to a selected
body (directors, council, committee etc.) each partner, except a “limited
partner is liable for all the debts of the partnership personally, to the full
extent of his private estate. The liability of member of a company is
limited to the amount of his holdings. No more than 20 persons (or 1, in
a banking business) may usually associate in a partnership. There are
usually no limits to the number of members of a corporation. Each
partner has implied authority to contract on behalf of the others in the
ordinary scope of the partners, even if they are unaware of what he has
done. A corporation acts through appointed agents, and an ordinary
member has no power to bind the corporation.

3. between partnership and company

The characteristic of legal entity is one of the main distinctions between

a limited company and a partnership, which is not a distinct person in
law but simply the partners’ action acting together partnerships limited
companies. The consent of the other partners is required before one
partner can order of any of his interest. Each partner is an agent for the
firm to make contracts. The liability of each partner for the firm’s debts
is unlimited, except in the case of a limited partnership. Partners may
make what agreements they like interest, (between themselves). Partners
may be undertaking any business. Shares are freely transferable (subject
to the

51
Articles). A shareholder is not an agent for the company. The liability of
each member is limited by shares or guarantee.

52
Part two: Business Contract

Chapter one: Definition and elements of Contracts

Section one: Definition

The whole spirit of business life Is the making of contract. Contracts to

perform work; contracts to buy and sell; contracts to make something; or
to employ someone; or to use something. We must therefore, know what
a contract is. A contract is an agreement between two or more people.
Every contract is an agreement- but not every agreement is a contract.
Two people agree about something to be done. They are called “the
parties” first, the subject of their agreement may be such that neither of
them has the remotest intension that any legal consequences should flow
from it. For example, you invite someone to dinner and he say “yes, I
would love to come”. You have an agreement. However, if he just does
not turn up, neither of you would expect to hurry round to court and sue
for the cost of the wasted food! So, the first essential of a contract is that
the parties should intend their agreement to have legal consequences. In
the second place, the agreement reached may have certain aspect about it
which makes it such that the law will not enforce it. In other words,
although it is a contract, it is not valid contract.

53
So that a contract is “an agreement that creates rights and obligations
that can be enforced in law.” It is “a voluntary exchange of promises or
commitments between parties that are legally enforceable in our courts.

Section two: Elements and Forms of contract:

1. Elements of contract:

This section focuses on seven main topics:

1. An intention to create legal relations the parties must have

intended to create a legally enforceable agreement.
2. Offer one part point toward its intention to enter into contract on
certain terms.
3. Acceptance the other party agrees to enter into the contract
proposed by the offer or.
4. Consideration when conveying acceptance, to offered promises
something of value to the offer or.
5. Certainty of terms – the parties must reach agreement on all of the
essential terms in the contract.
6. Capacity of contract – the parties are legally permitted to enter into
the contract.
7. Legality the purpose of the contract is legal. Each of these
elements will be discussed in more detail below

There an additions to that elements of a contract as a following:

54
• A party must have capacity to contract.
• The purpose of the contract must be lawful.
• The form of the contract must be legal.
• The parties must intend to create a legal relationship.
• The parties must consent.

2. Forms of contract

Most contracts are equally valid and effective, whether they are oral or
written. The only difficulty with oral contracts is that the parties may not
properly remember what they actually agreed, and it’s more difficult to
prove the details of the agreement. However, certain contracts must be in
writing, and others are unenforceable unless evidenced by writing.

Contract which by statute must are in writing

• Bill of exchange or promissory note must be made in writing.

• Contracts of marine insurance are void unless made in writing in

the form of a policy.

• A consumer credit agreement, such a hire-purchase or loan

agreement must be in writing and signed by both parties.

• A bill of sales must not only be in writing but also in a certain

form; otherwise, it is void.

• Contracts for the sale of land must be in writing and must be

signed by or on behalf of both parties.
55
Explanation about the elements

• The agreement

As we have seen, in order to have a contract there must be an agreement,

there must be an offer, and an acceptance. However simple or however
complicated the contract may be, this rule is unchanging. For example,
at one may say: “ok” offer has been followed by acceptance – hence
there is a contract. A civil engineering contractor may submit tender
documents for the contraction of a wall for £200 million. After months
of negotiation, all the details will finally be accepted. Once again, an
offer has been made and accepted. A contract exists. As you can
imagine, a number of rules have grown up to regulate and decide on
whether a valid or acceptance has been made. In complete agreement
and Social agreements

1. In complete agreement

It sometimes happens that the parties to a contract will agree in principle

only, leaving many details unresolved, or they will agree only certain
things, or omit other necessary matters. These are called “incomplete
agreement”. The parties must reach agreement on all of the essential
terms in a contract it must be possible to determine the meaning of the
contract with a reasonable degree of certain.

56
Three issues could arise that will cause a contract to unsuccessful for
lack of certain of terms:

1. Incompleteness: the omitted terms are so important that they

warrant the conclusion that the parties have not yet reached an
agreement; for example, lack of price or a formula to determine the
price.

2. Agreements to agree: A fundamental item is clearly left subject to

negation or agreement with in a contract.

3. Vagueness: A term is so vague or inexact that multiple meanings

can be reasonably supported.

2: Social and Domestic agreements

Rarely, if ever, do social agreements give rise to the implication the legal
consequences were intended. The winner of a golf competition had no
legal right to the prize, because no one connected with the competition
intended such results to flow from the entry of competitors

In the case of agreements between members of a family, some are and

others are not intended to have legal consequence. There is no reason
why his son. However, on the other hand, such pacts are frequently not
meant to have this effect. It is obviously, much easier to imply
contractual intent in an agreement between two commercial
organizations operating at “arm’s lengh” than it is between immediate
members of a family. As always, if the agreement and all circumstances
surrounding it.

57
 • The Offer

An offer is an expression by one person (the “offeror”) that he is willing

to contract with another(the “offeree”) on specified terms. If it is to form
the basis of a contract. The offeror must intend those legal consequences
shall result. An offer can be made to one or more specified people, or it
can be general, made to “the world at large”. It can take a number of
forms – as follows.

• An offer made to a specified person, either orally or in writing.

This is straightforward.

• An offer made to the “world at large”. This is where a person

announces that he will do so and so, if anyone whom cares to
accept will do what is required by the offer. For example, a person
puts an advertisement in the newspaper: “£5 reward will be given
to anyone who returns my lost document”. That is a valid offer to
anybody who finds document, and appropriately returns him.

If the offer is in the form of promise by the offer to do or pay something

in return for for some act by the offeree, then the performance of the
required act it is in itself a signal of acceptance of the offer. An offer,
once made, does not remain open for acceptance for ever. It can
terminate for a number of reasons and, once terminated, it is no longer
capable of being accepted. An offer terminates in four ways:

1. If it is withdrawn

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Unless an offer specially states that it is binding or that it will remain
open for a definite stated time, it can be withdrawn at any time before it
has been accepted that is the general rule. However, difficulties can
arise. If the acceptance of an offer involves the doing of some act can the
offer is withdrawn when the act has been partially completed?
According to the strict rule, the answer should be “yes”. The classic
example is: if one man offers another £100 if he will go new work, cans
the offer be withdrawn when the traveler is halfway there? Much
judicial has been used to explain this but the generally accepted solution
is that the acceptance is complete once the offeree has commenced the
performance, but the offeror is not bound to buy until it has been
completed. A father promised his son and daughter-in-law that a house
in which they lived should be theirs as soon as they had paid off the
credit. To his knowledge, they started paying the installments’. He then
purported to cancel the offer.

2. If Lapsing of the time there

An offer may also come to an end by lapsing. And offer will lapse and
thereafter be incapable of acceptance, in three events:

(i) In the first place, if the offer specifically stated that it would
cease, or had to accepted, by a certain date.

(ii) Second, if it stated that is was conditional upon some

circumstances other than time. In a financing Ltd v. Stimson
(1962), Mr Stimson signed an agreement to buy a car on hire
purchase. The agreement

59
Stated that it would become binding only when accepted by financings
Ltd. Before the company’s signature had been obtained, the car was
stolen. It was recovered damaged. The offer was capable of acceptance
only while the car remained in substantially the same condition as when
the offer was made. The offer was deemed to have lapsed, and no
contract arises.

(iii) In the third place, an offer lapses if it is not accepted within a

“reasonable” time. It would, plainly, be quite wrong if every
offer remained open for ever and a day. But what constitutes a
“reasonable” time depends on the facts of the particular case.
An offer to buy fresh fruit or vegetables will lapse after quite a
short period, one to sell a house or a motor car will remain open
much longer.

3. If it is rejected

If the Offer rejected by the offeree in any time before it has been
accepted as a general rule the Offer will be terminate

4. On the death of either party before Acceptance

The death of the offeree always terminates an offer. His personal

represented cannot accept on his behalf. There is some doublet as to
whether an offer can be accepted if the oferee is not aware of the death
of the offeror. One view states that the death of the offeror automatically
terminates the offer, and that knowledge of it is immaterial. The better
View is, probably, that it is terminated only if the offeree is aware of the

60
Fact, unless the personality of the offeror is an essential element of the
matter.

Tenders and offer

A tender may legally constitute an offer or what is generally known as a

standing offer. Tender may be expressed in words which legally
constitute an offer, an example is where a government ministry insert
and advertisement in the newspapers asking for a supply of specified
quantity of goods during a specified period of time. And a tender writes
to the ministry that he is willing to supply the goods within the specified
time at certain price, the trader’s letter or tender will constitute an offer
which may be accepted by ministry if it is accepted the trader would be
bound to deliver the specific quantities of goods ordered from time to
time. During the specified period until the specified quantity of good is
delivered. A tender that constitutes expressed in words which not legally
constituting an offer called a standing offer, an example would be where
a government ministry advertises that may be require goods of a certain
description and quality during a specified period during which the goods
are to be delivered if and when demanded. If a trader writes to the
ministry intimating his willingness to execute the order to be then made
by them, the letter will constitute what is called a standing offer.

• Acceptance

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• The fundamental rule to remember is that the acceptance of an offer
must be absolute. Offer and acceptance must correspond in every
particular. If a purported acceptance alters the offer in any way, it
constitutes a rejection of the offer, followed by a counter-offer.
• If an offer is made in alternative terms, the acceptance must make it
quite clear which alternative is being accepted.
• If an offer is accepted but the acceptance introduced additional terms
not contained in the offer, this also constitutes a rejection
• An acceptance does not have to be express – it can be indirect from
conduct. An offer to buy goods is acceptance by supplying them.
• As in the case of an offer, an acceptance must be communicated to
the offeror, otherwise it is not effective.
• If an acceptance is given orally or by telephone, or a written
document is handed to offeror, no problem of when the acceptance is
communicated can arise. However, if acceptance is made by post,
what then? It is valid when posted, or when received? There has to be
a rule, and for no particular reason English law says that a postal
acceptance is a complete, and the contract binding, when the letter is
posted or handed to the postal authorities. This means that, should the
letter of acceptance be lost or postponed in the post, this does not
affect the validity of the contract.

D. Consent of the parties

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Literally means a meeting of minds if two people’s minds meet a court
of law will usually declare that those people reached an agreement in
order that this meaning of minds may occur, the law requires that there
must be:

A. -An offer made by an Offeror to an offeree and

B. -An acceptance of the offer by the offeree.
E. Consideration

Under basic principles of contract consideration is the answers to the

question. Why are you entering this contract? Or what are you receiving
for a being a party to this contract? In order any agreement to be deemed
legally binding; it must include consideration on the part of every person
or company that enters the contract

What is consideration?

Consideration is the benefit that each party gets or expects to get from
contractual deal, if Ahmed signs a contract to buy a car from Bare for
$5000 Ahmed, s consideration are the 5000 and Bare, s consideration is
the car.

Consideration is usually either the result of:

• A promise to do something you are not legally obligated to do, or

• A promise not to do something you have the right to do often, this
means a promise not to file a lawsuit

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Sometimes this change in position is also called goods deal, how does
consideration work in the real world, let’s say you are damaged your
neighbor’s car.

Your neighbor Is legally permitted to sue you for the damage but instead
aggress not to sue you if you buy him $1000 this agreement provides
adequate consideration for the contract because each party is giving up
something in the exchange you are giving up the right to sue you.

In some situation courts will step in and declare that a contract is un

enforceable because it lacks consideration, if either the promisor or
promise already had a legal obligation to tender such payment, it cannot
be seen as consideration in the legal sense.

Let’s look at some of these: one of the parties was already obligated to
perform, for example police officer cannot claim the reward for
capturing a wanted suspect, because the officer is already obligated to
capture and arrest people who break the law.

If your rich uncle promises to give you money to buy a house without
any strings attached, this is a promise to make a gift, if he changes his
mind, you can’t force to come up with a cash because his promise was
one sided. You have note don or promised to do anything in exchange

Consideration is the concept of legal value in connection with contract.

It is anything of value promised to another it can take the form of
money,

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Physical, objects service promised actions abstained from a future action
and much more

F. Capacity to contract

In a general anybody over the age of 18, who, at the time, is sober and
mentally unimpaired, is capable of contracting. This also applies to
corporations which can contract in exactly the same way as living
persons – but, of course, they must do it through the agency of a human
being. However, certain categories of person have no capacity (or only
limited capacity) to contract. Capacity refers to the capability to enter
into legally binding agreements. Minors and people with weaken mental
capacity may lack capacity to contract. The basic element to enter into a
valid contract is that s\h much have sound mind. Contractual capacity
means that the parties are able to understand that contract is being
binding, it’s enough if they understand that they are entering into a
contract, and that they understand the general nature of the contract
certain class of people exempted from category of people who are
capacity of entering into contract.

1- Minors (or infants),

2- Insane,
3- People under the influence of drug
4- Bankrupt,
5- Enemy alien.

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Minors are people who have not yet reached the age of mature according
to the law of their province (usually 18 or 19). Because minors have less
bargaining and goods deal power than adults, as a general rule, contracts
made by minors are not enforced against them but is enforceable by
them. There are two exceptions to a minor’s immunity from contractual
liability: necessaries and beneficial contracts of service.

1. Necessaries

Contracts made by a minor for the condition of necessaries are binding.

To be a necessary, the good must be necessary to this particular minor,
and the minor must not already have an adequate supply of it. Although
a minor only need pay reasonable price for necessaries, the contract
price is presumed to be reasonable in the absence of evidence to the
contrary. The court requires the adult who is supplying good to establish
what is in fact necessary for the minor, and this may be difficult for an
adult who does not know of the infant's particular circumstances.

The courts have identified food, clothing, rooms, medical attention, legal
advance, and transportation (means to get to and from work, but not
purchase of a vehicle) as necessaries.

2. Beneficial Contracts of Service

Beneficial contracts of service made by a minor are binding. These

include contracts of employment when they are found to be for the

66
Minor’s benefit and not unfair. However, a trading contract does not
bind an infant if it is beneficial to him.

II. Legality of object

For an agreement to constitute a legally enforceable contract it must

have been entered into for a lawful purpose, an agreement to do
something which is prohibited by statute is not a contract.

So that such agreements are generally called “illegal contract” and there
are numerous examples of illegal contracts such as:

• All agreements or contracts formed by the way of gaming wagering

may still be unenforceable if it has an object or purpose that offends
public policy or violates statute law.

• Contracts which are contrary in public policy, like to promote

corruptions in the public service. Tends to promote sexual
immorality, tends to interfere with the sanctity of marriage, tends to
prejudice the administration of justice

• In the absent of evidence to the contrary, it is presumed that

transactions are legal.

What consideration and object are unlawful and what not?

The consideration or object of an agreement is lawful, unless

1. It s forbidden by law; or

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 2. It would defeat the provisions of any law; or
3. Is fraudulent; or
4. Involves and implies injury to the person or property of another, or
5. The court regards it is immoral, or opposed to public policy. In
each of these cases, the consideration or object of an agreement is
said to be unlawful. And every agreement, of which the object or
consideration is unlawful. Is void.

1. Dealings with prostitutes

▪ Always considered depraved sale hiring of goods to a prostitute

for enabling her to carry on her business and is void

▪ Landlord knowingly letting his house for carrying on the business

of prostitution and is void

“Public policy” is vague and unsatisfactory term.

The twin touchstones of public policy are,

• Advancement of public good and

• Prevention of public misbehavior.

2. Heads of public policy

Treading with enemy

▪ Object of war is to cripple the commerce of enemy
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 ▪ A declaration of war imports prohibition of commercial
Intercourse and correspondence with the inhabitants of enemy
country.

Trafficking in public office

▪ An agreement with a public officer to act corruptly is contrary to

public policy.

▪ Agreement to provide money to a parliamentarian to influence his

judgment

▪ Sales of public offices in consideration of money.

Interferences with administration of justice

▪ Interference with course of justice

▪ Shifting prosecution

Marriage brokerage contracts

▪ An agreement to obtain marriage of a person in consideration of

money – void

▪ Agreement for the sale of girl – void

▪ Attempt to make any material gain out of marriage is equally

opposed public policy and void

▪ Gifts promised at the time of marriage – void

Unfair or unreasonable dealing

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Where –

▪ Parties economically are not on same footing

▪ Unequal bargaining power

▪ One in a position to exploit and the other is vulnerable

▪ Bargain is apparently unfair

Contracts affected by statute

Contracts may be rendered void or illegal by statutes such as laws

governing workers’ compensation, bankruptcy, competition, taxation,
customs, and betting.

Finally an agreement may be regarded as illegal if the subject matters is

contrary to public interest, particular in the areas of relations with
foreign countries, national defense, public service, or administration of
justice in Somalia

Section three: Diminished contractual capacity

A person who is insane or incapacitated through drink or drugs also

lacks capacity to contract. As is the case with minors, such a person will
have to pay a reasonable price for necessaries, while other contracts are
voidable at his or her option but enforceable against the contracting
party. While it is usually easy to establish whether or not a person was a
minor at the time of making a contract, it can be hard to prove that a
person was
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Insane or drunk at that moment, especially if the contract was not
negotiated in person. Therefore, the courts require a person of
diminished contractual capacity to express that the other party knew of
the condition at the time of the agreement. In the absence of clear
evidence, the courts will assess the probability of knowledge from the
circumstances, including the evident fairness or unfairness of the
contract for the party lacking capacity. If a person has been declared
incapable by the courts, any contract the person attempts to make is
always void

1. Capacity of drunken persons

If a person purported to inter into contract at a time when he was too

drunk to understand what he was doing and other party was aware of
this mental conditions, the contract will be voidable at his option, but a
drunken man who enters into voidable contract, may affirm or ratify it
when he is sober.

2. Capacity of persons of unsound mind

A contract entered into by a person of unsound mind is voidable at his

option; if it is proved that the other party was aware of his mental
condition

3. Duress

Duress is a contract of treat to use actual violence against the contracting

party himself or near relations such as wife, parent or child, it must be

71
Exerted either contracting party or by third party acting with his
knowledge

4. Bankruptcy

The bankruptcy of the principal will terminate the authority of an agent

under the bankruptcy act; this because the principal would henceforth
lack contractual capacity. Bankruptcy of the agent will terminate a
contract of agency.

Section four: Contractual defects and Breaches of contract

1. Contractual defects
A. Mistake
The courts may grant relief when a party enters into a contract under a
basic misunderstanding, mistake is legally relevant in the cases of
operative mistake (i.e the mistake which operates to destroy the
consensus that is the basis of a contract and the parties are deemed not to
have agreed on anything) such a mistake must be a fact and not of law

Mistake of law is when a party enters into a contract, without the

knowledge of the law in the country; the contract is affected by such
mistakes, but is not void. The season here is that ignorance of law is not
a justification.

Mistake of fact where both the parties enter into an agreement are under
a mistake as to a matter of fact essential to the agreement, the agreement

72
Is void. Ahmed agrees to buy a certain horse from Bare; it turns out they
the horse was dead at the time of bargain through either party was aware
of the fact. The agreement is void

An operation mistake may be

1- Common mistake: this may occur where there is an agreement to

sell goods which unknown to the seller and buyer

2- Mutual mistake: this may occur if the parties misunderstand each

other on fundamental fact so that there was actually no true
agreement between them

3- Unilateral mistake: this called unilateral because only one of the

parties os mistaken the other party is aware of the mistake because
he has fraudulently induced it. This may occur in instances of
mistaken identity or document mistaken signed.

1. Misrepresentation: A misrepresentation is an untrue statements of

fact which is made by a contracting party to other part before or at
the time of contracting which is intended to induce and actually
induces, the person to enter into the contract

2. Contract fraud: Occurs when a patty in a contract presents

information to another that is incorrect or meant to confuse other
party for example contract fraud may be found when an individual
claims that a contract is for sale of acar, when in fact the terms of
the contract specify that is for the sale of boat. In order to prove
fraud it must be shown that:
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 1- One party knowingly Misrepresented a material fact

2- With intent to defraud the other party also the other party must
have relied upon the misrepresentation, and the
misrepresentation must cause the actual loss.

3- Contract coercion: this is occurs when a contract agreement is

entered into under conditions involving harm or threats of harm
the laws required contract must be entered into knowingly and
willingly by all parties thus is a party signs a contract due to
coercion the contract generally will not be consideration legally
enforceable.

4- Exploiting

It’s to treat someone unfairly by asking them to do things for you but
giving them very little in returns, home works can easily be exploited by
employee,
B. Breaches of contract

The breach of a contract is defined as one or more parties involved in a

contract do not honor a binding agreement. It can be difficult to work
out if a party to a contract is in breach of contract in many circumstances
this confusion is called by a contract that was initially poorly or
designed nevertheless. There are a number of common was that a
contract can be breached which are explained in these details.

• A minor breach or partial breach of contract is when the non

breaching party of the contract is not entitled to an order for
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 Performance of its obligations but only to connect the damages for
which they are owned. For instance if a homeowner hires a
contractor to install new windows in a home and asks for wind
resistant windows but the contractor uses windows that are not
wind resistant the homeowner will ask the contractor for a
damages incurred since there is no difference in value between the
two windows the homeowner will not be any damages.

• A material breach of a contract is when there is a failure to perform

apart of contract that permits the other party of the contract to ask
for damages because of the breach that has occurred. Instance if
the contractor uses windows that are not wind resistant and
window break, the homeowner can collect damages for replacing
the windows with the wind resistant ones upon the occurrence of a
material breach the contract will be deemed to have ended and the
party who has suffered from the breach will be in a position to
claim remedies

• A fundamental breach a contract is when the person that has had

the contract breached against can use the breaching party for
damages incurred as well as terminates the contract if they wish to
do so.

• A anticipatory breach of a contract is when the non- breaching

party realized that the other party of contract in the future and can
terminate the contract and use for damage before the breach
happens.

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Chapter two: definition Rights, Duties and Liabilities of Contracts
of carriage

Section one: definition of carriage Contracts

A contract of carriage is a contract where by a person, called the carrier,

undertakes for reward to carry persons, baggage or goods and to convey
them to specified place.

1- Baggage
1- Objects, which a passenger causes to be carried with him, such as
objects contained in trunks, baskets, bags or other packages of a
similar nature, shall be deemed to be baggage.
2- Objects which a passenger is allowed to carry with him and which
are not registered by the carrier shall be deemed to be hand-
baggage.
3- Objects which are entrusted to and taken over by the carrier shall
be deemed to be registered baggage
Section two: Rights, Duties and Liabilities of a Common carrier

1. Duties and Rights of Contracts

1. To receive and carry goods from all corners, indiscriminately
2. To carry the goods safely
3. To carry by his customary route without deviating from it
unnecessarily
4. To obey instructions of the consignor
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 5. To deliver the goods within the agreed time at the stipulated
place

The common carrier has the right to refuse carriage of goods in the
following circumstances:

• If he has insufficient or no room in his carrier

• If the goods are of a type other than what he professes to carry
• If the goods are not required to be carried by his customary route
or to his usual destination.
• If the goods are dangerous to carry or expose him to risk.
• If the goods to be carried are not offered at a reasonable time and
in reasonable manner.
• If the consignor is not prepared to pay reasonable amount in
advance

A common carrier is an insurer of goods, but there are certain exceptions

to this rule.

• He is not liable for any loss or damage to goods caused by an act

of good or natural calamity, like the vehicle being struck by
lightning.
• He has no liability in case of injury caused by enemies of the state.
E.g. foreign with whom the country may be at war.
• He cannot be held responsible for loss due to any natural vice or
natural weakening of goods in transit. For e.g. disappearance of
liquids, deterioration of fruit etc.
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 • He is not liable for any loss due to neglect on the part of consignee.
Such as out of order packing of goods.

2. The Liabilities of Common carrier

a. Dangerous Goods

It is the duty of the consignor to warn the carrier when dangerous goods
such as explosive, acids or poisons are booked for carriage. In the absent
of such warning, the consignor will be responsible for any probable
unfavorable consequence

b. Railways liability

Railways are liable for loss, damage or not- delivery of goods arising
from any cause except the acts of god, war or public enemies, fire,
explosion or any unexpected risk, arrest, restraint or seizure under legal
process, limitations imposed by the central or state Govts, natural
deterioration or wastage due to inherent defect, vice or quality of goods;
hidden defects, and any act of omission or negligence on the party of
consignor or his agents

3. Liability termination

Transit of goods by the railways terminates on the arrival of the goods at

the destination and expiry of free days allowed for unloading of
consignment from the railway wagon, without payment of demurrage.

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The liability of the railways as a carrier terminates with the termination
of transit. However, for the period of 7 days after the termination of
transit

The railways administration continues to be responsible as a bailed for

loss, destruction, damage, deterioration or non-delivery of goods except
where the consignment is at owner’s risk rate after the expiry of 7 days
the railways are not responsible.

4. Labilities of Carriage the goods by Sea

Goods transported by sea are governed by the carriage of goods by sea

act, and the bills of lading acts, besides, the merchant shipping act, and
the marine insurance act, are also applicable. Here we shall confine our
discussion to the first two of the above mentioned act.

A contract of carriage of goods by sea is called a contract of

affreightment and the consideration for carriage is called the freight.

A contract of afreightment may take the form of a charter party where an

entire ship is hired, or a bill of lading, where the goods are to be carried
in a general ship which can be used for this purpose by any person. In
both these contracts, the ship owner as the carrier undertakes the
responsibility of carrying the goods of the consignor safely and securely
to the destination.

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There some Conditions Implied contract of carriage of goods by sea

In a contract of carriage of goods by sea, the following conditions are

implied:

1- Seaworthiness – this means that the ship is reasonable fit to

encounter the perils of the sea. This is an absolute undertaking
warranted by the ship owner. Seaworthiness is a relative terms
meaning that the ship is fit to undertake the particular voyage and
to carry the particular cargo.

2- Commencement of voyage the ship shall be ready to load the

cargo and commence the voyage with all reasonable dispatch.

3- Non – deviation of voyage – it means that if the ship does not

carry out the voyage by the prescribed or usually route in the
customary manner, the contract becomes void from the beginning
of the voyage, no matter when and where the deviation from the
usual rout took place.

4- Dangerous Goods not to be Shipped- if the shipper ships

dangerous goods and if on account of this, the charterer suffers any
damage, he can recover the same from the shipper.

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Chapter three: Charter party contract

Section one: definition of Charter party and its forms

1. Definition of Charter party

A charter party is a contract providing for a hiring of a whole ship. Its

terms may amount to a leasing of the ship. When the master and the
crew of the ship because the servants of the charterer. A charter party
may be for a particular period, or for a particular voyage. In the former
case it is called a time charter party and in the letter case, a voyage
charter party has no specific form; the form varies from trade to trade
depending on the customs of the trade.

2. Forms of Charter party

a. Bill of lading

A bill of lading is issued when goods are delivered for carriage to a

general ship, which offers to carry them. The position of the owner of a
general ship is that of a common carrier. A bill of lading may be used
even when a of lading acknowledges the ship is charted. A bill receipt of
goods is a document of title to the goods and is also a contract of
carriage of goods.

A bill of lading, as a document of title to the goods, can be transferred to

another person by endorsement and delivery.

b. Delivery of goods

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The prime duty and obligation of a carrier by sea is to deliver the goods
to the holder of the bill of lading is commonly drawn in a set of three
copies, one of which is sent to the consignee, the second is for the ship’s
master and the consignor retains the third.

c. Ship owner’s lien

In the event of non-payment of freight and other charges, the ship owner
has a right of lien on the cargo. He is thus entitled to retain the goods in
his possession until the dues are paid. His lien exists independently of
any express agreement in this regards, but ceases upon the delivery of
goods.

C. Carriage of goods by Air

The carriage by Air Act, governs the carriage of goods by air. Ghe
provisions of this Act apply to domestic flights in the same manner, as
they are applicable to international flights carrying cargo. The various
documents relating to carriage by air are briefly described hereunder.

1. Passenger ticket

The passenger ticket issued by a carrier must show

➢ The place and date of issue.

➢ Places of departure and destination.
➢ The agreed stopping place.
➢ The name and address of the carrier, and

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 ➢ The statement that the carriage is subject to the liabilities
mentioned there. The absence or loss of passenger ticket does not
affect the validity of the contract of carriage, but if the carriage
accepts a passenger without a ticket, he cannot enjoy the benefit
of limiting his liability.

2. Baggage check

For the carriage of baggage, the baggage check, made out in duplicate
must contain the following particulars:

➢ The place and date of issues

➢ Place of departure and destination,
➢ Name and address of the carrier or carriers,
➢ The number of the passenger tickets,
➢ A statement that the baggage will be delivered to the holder of
baggage check,
➢ The number and weight of the package,

If the baggage check does not contain the particulars set out in above,
the carrier shall not be entitling to the benefit of rules limiting liability.

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Part three: Consumer and intellectual property protection

Chapter one: introduction to Consumer protection

Section one: definition and concept of consumer

A ‘consumer’ is defined as a person who utilizes or consumes products

or services. A consumer is defined as a person who buys products or
receives for a consideration that has been paid or promised or partly paid
and partly promised, or under any delayed payment system, The
following are some of the rights of consumer.

1. Right to Safety

This refers to the right to be free from the marketing of products and
services that risk life or property. The items and services they acquire
should not only suit their current requirements, but also serve their long-
term goals.

2. Right to choose

Means the right to be guaranteed access to a diverse range of products

and services at a reasonable cost whenever possible. It means the right to
be guaranteed of adequate quality and service at a reasonable price in
the event of monopolies.

3. Right to be informed

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To protect consumers from unfair commercial practices, consumers have
the right to be informed about the quality, quantity, effectiveness,
cleanliness, standard, and price of goods. The consumer should insist on
acquiring all available information about the product or service before
making a choice or decision.

4. Right to consumer education

The right to acquire the knowledge and skills required to be a well-

informed consumer at any time in one’s life. Consumer ignorance is
mostly to fault for their exploitation, especially among rural clients.
They should be aware of their rights and should be able to exercise it.
Then and only then can true consumer protection be achieved.

5. Right to be heard

This indicates that consumer interests will be considered in relevant

forums. It also includes the right to be represented in various forums
intended to protect consumer interests. Consumers should form non-
partisan, non-commercial consumer organizations to represent them on
various government and non-governmental bodies dealing with
consumer concerns.

6. Right to Seek redressal

In the case of unfair trade practices or consumer mistreatment, this term

refers to the right to seek redress. It also includes a consumer’s right to a

85
Fair settlement of legitimate issues. If a customer has a real complaint,
they must file it. Their critique may be little, yet it has a significant
influence on society at large. They can also seek help from consumer
organizations to solve their difficulties The most important terms in the
concept of consumer are

A) Debtor: the debtor is the person who receives credit the debtor
can be an individual, partnership or a club
B) Creditor: this is the person or organization supplying the credit
the creditor can be an individual, a company or any other
organizationit is frequently a finance company, a bank or shop

C) Supplier: this is the person who or organization which, supplies,

goods or services which are the subject matter of the credit. Før
wxample, if a washing machine is acquired by hire purchase, the
shop supplying it is the “supplier”

We have here outlining the protection given to consumers by the

consumer Act that is protection in respect of certain transactions
involving credit in all its various from. However, in addition, for many
years parliaments has appreciated hat the common law does not provide
an adequate remedy for a consumers in their dealings with traders and
manufactures.

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Section two: Consumer Safety

General position in civil law and criminal law

(a) Civil law

The principal civil law remedies in the event that a purchaser suffers
injury as a result of a defective or unsafe product, such remedies can
arise in contract, i.e. because the supplier has been in breach of a term,
express or implied, of the contract of sale, or they can arise in tort, as a
result of a breach of a duty of care owed by the manufacture and\or the
supplier. There is, however, an additional civil law remedy where
consumer safety is in question numerous statutes are aimed at
preventing unsafe trade practices

(b) Criminal law

Perhaps the most effective controls on manufactures and others in the

field of consumer safety are contained in statutes imposing criminal
liability. These involve a penalty a fine or sometimes imprisonment – in
the event of contravention.

In the field of consumer safety, the consumer protection Act empowered

the ministers of state to make regulations in respect of the construction,
design, composition, and a wide range of classes of goods. The
regulations are designed to prevent, or reduce, the risk of death or
personal injury to persons using those goods. The Act made it an offence
to sell to sell, or to

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Have in a person’s possession for the purpose of sale, any goods which
contravene the regulations. As well as providing a criminal penalty, the
Act also created civil liability for breach of the obligations imposed by
the law

These Acts were found to be inadequate for their purpose. The consumer
safety Act gives the state much wider powers to make regulations these
include the power to prohibit the sale of dangerous products and to
ensure that goods satisfy specified standard, and are tested or checked in
a specified manner

Regulations made under the Act thus Endeavour to ensure not only that
goods are correctly manufactured, tested and inspected to avoid or
minimize the risk of danger to health and safety, but also to ensure that
appropriate information about the goods, and how to use or handle them,
is given to purchasers.

Irrelevant or misleading information must not be given. To back up the

regulations, the state is empowered to issue prohibition. Notices.
Forbidding either a particular person, or persons in general from
supplying specific goods which have been designated as unsafe, Notices
may also be given requiring people to publish warnings in specified way
about potentially hazardous goods which they supply. The consumer
safety Act provides for criminal sanctions for infringement, and also
permits civil action in respect of obligations imposed by the Act. The
consumer

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Protection Act makes it an offence to sell goods that fall below the
general safety requirement, that is that the goods are reasonably safe
manner.

The main points of the regulations can be summarized as follows:

(a) Producers

Producers are required to place on the market for consumers’ use only
products which are safe. Term “producers” includes manufactures,
imports, wholesalers, and “other professionals in the supply chain in so
far as their activities may affect the safety properties of a product”. This
last category may over designers, carriers, packers, and warehousemen

(b) Distributors

Distributors are required to ensure that they do not supply products

which they know, or should have presumed, do not fulfill with the
general safety requirement. “Distributor” is defined as “any professional
in the supply chain whose activity does not affect the safety properties
of a product”

(C) General Safety Requirement

The general safety requirement is now to be assessed in relation to the

risk that a product presents to the health and safety of persons. Several
factors are taken into account in the level of risk:

➢ The product’s characteristics

➢ Its effect on other products
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 ➢ Its labeling and instructions for use
➢ The category of consumers at risk when the product is used

(D) Monitoring of safety

As regards monitoring the safety of product’s the regulations impose

additional duties on producers and distributors. These involve the setting
up of post-marketing surveillance departments and programmers for
obtaining and disseminating information to consumers during the period
of the product’s use.

Chapter two: Intellectual property

Section one: The nature of intellectual property

Intellectual property is the product of mental activity, i.e., ideas or

inventions, of which individuality or originality is an essential feature,
intellectual property is non-exclusive. Ideas cannot be possessed
exclusively nor can a person prevent another from coming up with the
same idea or a similar one. Ideas are also non- rivalries. My possession
and enjoyment of an idea does not diminish your ability to do the same.

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Section two: types of intellectual property

The main types of intellectual property are copyrights, trademarks,

patents, and industrial designs.

1. Copyrights

A copyright protects the manner in which ideas are expressed.

Copyrights law provides automatic protection, the forms of expression
protected by copyright are shown in the copyright Act provides the
original creator with the sole right to the produce or reproduce the work
or a substantial part of fit, the right to perform or deliver the work in
public, and the right the publish an unpublished work. In addition to
these and other more specific rights that can be assigned by the author or
creator, there are moral rights that cannot be assigned (but can be
waived), mainly the right to the integrity of the work and the right to
prevent it from distortion and misuse.

The general rule is that a copyright lasts until the end of the calendar
year in which the author dies plus 50 years. After that, the work
protected becomes part of the public domain. The copyright Act
provides for fair use of copyright works for the purpose of private study,
research, criticism, review, or newspaper summary. There are other
permitted usages such as public readings of reasonable extracts or
performance of musical works by worship or schools for charitable
purposes. Work

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Created in the course of employment is owned by the employer unless
there is an express agreement to the country.

2. Trademarks

A trademarks is a word, symbol, or design (or combination of these

features) that is used to distinguish the products or services of one
business from those of others in the marketplace. They include ordinary
marks (e.g., Nike “swoosh”), official recognition marks (e.g., SSA [
Somalian Standards Association ] approval on electrical appliance), and
distinguishing guise

Trademarks are protected at common law through the tort of passing off
misrepresentation of goods, services, or a business so as to deceive the
public into believing they are the goods, services, or business of another,
thus causing damage to that other person.

Registration of trademarks under the trade-marks Act protects a business

for 15 years plus indefinite renewals. Some of the advantage of
registering a trademarks are:

• Creates the presumption that the trademark is suitable and

distinctive and indeed owned by the owner.
• Secures an exclusive right to its use
• Provides the right to register the trademark in other countries.

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 • Provides protection against other types of infringement besides
passing off:

❖ Exact imitations
❖ Marks that will be confusing to consumers because of their
similarity to the trademarks;
❖ Trademarks depreciate, where someone uses the mark of
another to depreciate that trademark’s good will; and
❖ Imports by a distributor who is not an authorized distributor.

3. Patents

A patent is the right to stop others from making, using or selling an

invention or development to an invention for a period of up to 20 years
from the date of filing a patent application. Unlike copyright, a patent
does not exist automatically but must be granted by the appropriate
government body. The proposed invention must be demonstrated to be
patentable subject matter (e.g., product, composition of that product,
apparatus used to make a product, or manufacturing process

What is a patent?

Right to exclude others from making, using, offering for sale, selling or
importing the patented invention not a right to use the invention patents
inhibit free exchange of information

What can be patented?

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 ➢ Process or method
➢ Machine or Apparatus
➢ Article of Manufacture
➢ Composition of Matter
❖ Chemical Compounds
❖ Physical Mixture

1. Improvements of any of the above

Documenting invention
• Keep a notebook!
• Keep the pages sequential and clearly dated.
• Write down your experiments! (especially the ones showing
structure of the invention and how to make the invention) =
“reduction to practice”
• Also write down significant ideas= “conception”

Requirements for patentability

✓ USEFUL must have some utility; achieve some objective; not

against public policy
✓ NOVEL – Must be new, i.e., different from prior art
✓ NON-OBVIOUSNESS – Subject matter as a whole would not have
been obvious at time to person of ordinary skill in the art

What is infringement?

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An act that interferes with the full enjoyment of the monopoly granted to
the patentee the exclusive right, privilege and liberty of making,
constructing and using the invention and selling it to others to be used

4. Industrial designer

Industrial designer is “features of shape, configuration, pattern, or

ornament applied to a finished article to improve its aesthetic appeal.”
Protection of industrial designs is dependent upon registration pursuant
to the industrial design (five years with a renewal), although there may
be some protection under common law as a trademark

Part four: Law of agency

Chapter: Definition of agency

Agent is a person who is employed to bring his principle into contractual

relations with third parties. Various forms of agency, regulated by law,
exist universal, where an agent is appointed to handle all the affairs of
his principal;

Us a general; where an agent has authority to represent his principle in

all business of a certain kind;

And special. Where an agent is appointed for a particular purpose and

gives only limited powers.

Appointment may be express or indirect and may be terminated

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 • by acts of the parties;

• the death and bankruptcy.

• Or mental illness of either the principle or agent; can be

causing frustration or intervening legality.

Agency may be described as the legal relationship that arises when a

person called agent, is appointed to represent another called the
principle, in a transaction with some other person called third party.

1. Agency relationships

What is agency? Most people are familiar with the sue of the word
“agent” from relations in their daily lives. Common examples of agency
relationships are real estate agents, who buy or sell a house on your
behalf, or stockbrokers, who buy and sell shares on your behalf., More
formally, agency “is a relationship that exists when one party represents
another party in the formation of legal relations.”

The agent is the "person who is authorized to act on behalf of another”

and the principle is the “person who has permitted another to act on his
behalf.” Agents are often given authority to bind principals in
contractual relationships.

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Chapter two: Formation and the scope of an agency relationship

Section one: Formation of an agency relationship

Agency relationships arise in one of the following three ways

1. Express authority (agency by express agreement) an oral or

write contract appoints the agent and gives her specific authority to
act on behalf of the principle.

2. Apparent authority (agency by conduct; agency by estoppels)

no agreement exists, but the actions or statements of the principal
give a third party a reasonable feeling that the agent has authority
to act on behalf of principal.

3. Ratification- there is no express or apparent authority, but a

principal accepts a contact that was negotiated on his behalf.
Without his authority

Ratification of agency Relationship Requirements:

1. Acceptance by the principal must be clear (may be written, oral or

implied by the principal’s behavior)
2. Ratification must occur within a reasonable time after creation of
the contract; what is reasonable depends on the facts.
3. The principal must accept the whole agreement. If not, a new
agreement is formed between the principal and the third party
directly.

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 4. The principle must have been identified by the agent at the tie of
negotiation.
5. The principal has the legal capacity to enter into the contract both
at the time of negotiation and ratification.

Section two: The scope of an Agent’s Authority

• Actual Authority

A principal is bound by any actions that are within the agent’s actual
authority. In this context, actual authority refers to authority that was:

❖ Expressly given (orally or in writing); or

❖ Could be implied by the principal’s conduct (e.g., principal pays

for the goods); or

❖ Could be implied based on the usual authority given to a person

appointed to that position (e.g., corporate secretary) (also referred
to as commercial usage). The principal is bound whether or not the
third party is aware of the exact scope of the agent's actual
authority.

• Apparent Authority

Apparent Authority is authority that a third party is entitled to assume

the agent possesses, based on either usual authority or the conduct of the
principle.
The term holding out Is used to refer to conduct where a principle
represents someone to be its agent.
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A principle is bound by contracts within the agent’s apparent authority
only if the third party relied on the appearance of that authority. A third
party will not be able to enforce a contract if it knew, or should have
known, that the agent did not have authority to bind the principal.

• Ratification

Finally, a principal will be held liable if it ratifies (subsequently adopts,

based on words or actions) a contract that was made by an agent without
authority.

An agent can be held liable when she is acting on behalf of an

undisclosed principal. As long as the agent had authority to act on behalf
of the principal liable if the third party later discovers the person it dealt
with was only an agent. As well, an agent can be held liable when he
indicates that he is authorized to act for a principal but is in fact not
authorized regardless of whether or not the agent is honestly mistake.
This would be considered a breach of warranty of authority.

Section three: Responsibilities of agent to principal

Four main duties of agent owes to his or her principal

1. Responsibilities of agent to principal

Responsibilities description is duty to fulfill with the agency agreement

the agency has to comply with the express and implied terms (based on
custom) of the agency agreement.

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 2. Personal performance

In a general, become a principal places a high degree of trust in the

judgment and skill of an agent, the latter cannot delegate his or her
duties without the principal’s consent. When a business is appointed an
agent, responsibility may of necessity, be delegated to others in the
organization

3. Fiduciary duty

(“fiduciary” comes from Latin, meaning holding truest”) from a legal

standpoint, this is one of the strictest standards of care imposed on
relationships. The agent has to act in good faith and in the best interests
of the principal. It required that the agent:

1. A void conflicts of interest, where personal interests conflict with

The best interests of the principal
2. Disclose anything that may be relevant to the principal’s interests
3. Not personally profit from information or opportunities as a result
of the agency relationship.
4. No compete with the principal.

A fiduciary duty may be displaced by the agent’s specific instructions

5. Duty of care

The agent is required to take reasonable care in the performance of its

responsibilities. The skill demanded depends on the agent’s task and
competence.

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Section four: Responsibilities of principal to Agent

The principal is required to:

1. Pay reasonable remuneration (unless the parties expressly agreed

otherwise)

2. Covering the agent from expenses reasonably incurred in

connection with relationship.

Finally: Terminations of an agency relationship of occur in a number of

ways:

1. At the end of a time, event, or project specified in the agency

agreement;
2. On notice by either party; or
3. By circumstances; for example, it becomes impossible for the
agent to perform; tasks, the principle or the agent dies or becomes
insane, or the principal becomes bankrupt

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Part five: sale of goods and negotiable instrument

Chapter one: definition of sale contract and its essentials.

Section one: definition of sale contract

A sales contact, also known as a sales contract or sales contract, is a

legally binding document that sets out the terms for a sale between two
parties: the seller who offers goods or services and the buyer who wants
to purchase them. This contract serves as a formal record of the
transaction, protects the interests of both parties and ensures that the sale
runs smoothly. There are distinction between sale and an agreement to
sell?

Contract of sale of Goods:

It is a contract where by the seller transfers or agrees to transfer the

property in goods to the buyer for a price

Sale and Agreement to sell:

In sale of goods, the property in the goods is transferred from the seller
to the buyer immediately then the contract is called sale, but where the
transfer of property in the goods passes only after the seller has fulfilled
certain conditions subsequently is called an agreement to sell.

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Section two: essentials of a contract of sale:

The following are the Essential elements are necessary for contract of
sale:

1. Parties:

There must be at least two parties: there must be two distinct parties
(i.e.., seller and Buyer) to affect a contract of sale and they must be
competent to contract. A person who or agrees to buy goods is called a
Buyer” and a person who sells or agrees to sell is called seller

2. Subject matter.

Subject matter must be Goods There must be some goods, the property
in which is or is to be transferred from the seller to the buyer. The goods
which form the subject matter must be movable.

3. Consideration

The consideration for the contract of sale, called price, it must be money.
Where there is no consideration, it would be a gift, there is no contract
of sale. Similarly, where goods are sold for a price, which is to be paid
partly in cash and partly in goods then it is considered as contract of
sale.

4. Transfer of general property:

There must be a transfer of general property from the buyer to the seller

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And a contract of sale may be absolute or conditional. All the essentials
of a valid contract must be present in the contract of sale

Section three: Condition and Warranties of sale

Condition” is a stipulation essential to the main purpose of the contract,

the breach of which gives raise to a right to treat the contract as
repudiated.

Warranty” is stipulation collateral to the main purpose of the contract,

the breach of which gives raise to a claim for damages but not to the
right to reject the goods and treat the contract as repudiated. Whether a
stipulation in a contract of sale is a condition (or) warranty depends in
each case of the construction of the contract. A stipulation may be a
condition, through called a warranty in a contract. Implied Conditions:
The Act prescribes some of the implied conditions in a contract. Buyer
can repudiate contract for breach of any of these conditions:

Chapter two: negotiable instrument

negotiable” means transferable from one person to another and the term
instrument means,any written document by which a right is created in
favor off some person. “Thus, the negotiable instrument is a document
by which rights vested in person can be transferred to another person

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Section one: Promissory Note:

A promissory note is a written promise by one party (the note’s issuer or

maker) to pay another party (the note’s payee) a definite sum of money,
either on demand or at a specified future date. A promissory note
typically contains all the terms involved, such as the principal debt
amount, interest rate, maturity date, payment schedule, the date and
place of issuance, and the issuer’s signature.

There are Conditions Promissory Note:

1. Inwriting.
2. Promise to pay.
3. Unconditional.
4. Signed by the Maker.
5. Certain Parties.
6. Certain sum of money.
7. Promise to pay money only.
8. Number, place, date etc.
9. It may be payable on demand or after a definite period
10-It cannot be made payable to bearer on demand or even payable to
bearer after a certain period
11-It must be duly stamped
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Section two: Bill of exchange:

A,,bill of exchange” is defined “,,an instrument” in writing, containing

an unconditional order, signed by the maker, directing a certain person
to pay a certain sum of money only to or the order of, a certain person,
or to the bearer of the instrument.” Characteristic features of a bill of
exchange

1- It must be in writing.
2- It must contain an order to pay and not a promise or request.
3- The order must be unconditional.
4- There must be three parties, viz., drawer, drawer and payee.
The parties must be certain.
5- It must be signed by the drawer.
6- The sum payable must be certain or capable of being made
certain.
7- It must be duly stamped

Section three: Cheque.

A cheque is defined as a bill of exchange drawn on a specified banker

and not expressed to be payable otherwise than on demand” Thus, a
cherub is a bill of exchange with two added features, viz.: (I) it is always
drawn on a specified banker;

(ii) And it is always payable on demand and not otherwise

Requisites of A Cheque:

1. Written Instrument. A cheque must be an instrument in writing.

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2. Unconditional Order. A cheque must contain an unconditional

order.

3. On a Specified Banker Only. A cheque must be drawn on a banker.

Specified

4. A Certain Sum of Money. The order must be only for the payment

of money

5. And that too must be specified.

6. Payee to be certain. A cheque to be valid must be payable to a

certain person.

7. Payable on Demand. A cheque to be valid must be payable on

demand and not otherwise.

8. Amount of the Cheque. Amount of the cheque must be clearly

mentioned.

9. Dating of Cheques. The drawer of a cherub is expected to date it

before it leaves his hands.

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Part six: Principles of Business Ethics and

Chapter one: The principles of business ethics and property rights

Section one: The principles of business ethics

The principles of business ethics are related to social groups that

comprise of consumers, employees, investors, and the local community.
The important rules or principles of business ethics are as follows

• Avoid Exploitation of Consumers Do not cheat and exploit

consumer with measures such as artificial price rise and
adulteration.

• Avoid Profiteering – Unscrupulous business activities such as

hoarding, black-marketing, selling banned or harmful goods to
earn exorbitant profits must be avoided.

• Ensure Accuracy – Accuracy in weighing, packaging and quality

of supplying goods to the consumers has to be followed.

• Pay Taxes Regularly Taxes and other duties to the government

must be honestly and regularly paid.

• Get the Accounts Audited – Proper business records, accounts

must be managed. All authorized persons and authorities should
have access to these details.

• Fair Treatment to Employees – Fair wages or salaries, facilities and

incentives must be provided to the employees
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• Keep the Investors Informed – The shareholders and investors
must know about the financial and other important decisions of the
company
• Avoid Injustice and Discrimination – Avoid all types of injustice
and partiality to employees.
• Discrimination based on gender, race, religion, language,
nationality, etc. should be avoided.
• No Bribe and Corruption Do not give expensive gifts,
commissions and payoffs to people having influence
• Discourage Secret Agreement Making secret agreements with
other business people to influence production, distribution, pricing
etc. are unethical.
• Service before Profit – Accept the principle of “service first and
profit next.”
• Practice Fair Business Businesses should be fair, humane, efficient
and dynamic to offer certain benefits to consumers.
• Avoid Monopoly No private monopolies and concentration of
economic power should be practiced.
• Fulfil Customers” Expectations – Adjust your business activities as
per the demands, needs and expectations of the customers.
• Respect Consumers Rights −Honor the basic rights of the rights
of the consumer.

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 • Accept Social Responsibilities – Honor responsibilities towards the
society.

• Satisfy Consumers” Wants – Satisfy the wants of the consumers as

the main objective of the

• business is to satisfy the consumer’s wants. All business operations

must have this aim.

• Service Motive Service and consumer’s satisfaction should get

more attention than profit maximization.

Section two: property rights.

The term property actually refers to a person’s rights in relation to

something other than the thing itself. Property is any tangible or
intangible physical item, design, creative work, or concept that is owned

Tangible refers to physical property.

Intangible property refers to non-physical property.

Intangible property is any property that cannot be physically touched.

Example: Intangible property includes patents, trademarks, trade secrets,

copyrights, debts, and company good will. Property is further broken
down into personal property and real property.

Real property is land and anything permanently attached to it. Personal

property is anything other than real property
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Personal property can be divided into three main types: Goods -tangible,
moveable things such as cars and furniture intangible things such as
cheques, shares, and promissory notes. Intellectual property -patents,
copyrights.

Common crimes involving the property of others Criminal offenses

against someone else’s property include:

Larceny – Larceny is the unlawful taking (theft) of personal property

with the intent to permanently deprive the rightful owner of it.

Robbery Burglary - Burglary is theft by breaking into a building

(sometimes at night) with intent to commit a felony therein.

• Extortion -This is the unlawful obtaining of another’s property

though coercion, such as the threat of violence.- Robbery is theft
through violence

• Embezzlement This is the theft of money by an individual

entrusted to hold it.

• Fraud or False Pretenses

Fraud, False Pretenses, and Theft by Deception involve deceiving

someone to unlawfully take possession of her property threat.

A lease

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A lease, or tenancy, is a contract for the transfer of use and possession of
land from the landlord to the tenant. The two key characteristics of a
lease are that the interest in land is

• For a definite period of time and

• The tenant is entitled to led to exclusive possession, the tenant

controls the land and has the right to exclude all others, including
the owner. For period time.

Thank God, writing of this text book ended on 9/11/2024

By Dr. Abdirahman Hassan Wardhere.

• Professor of Public Law at the University of Mogadishu

• Head of the Department at the Faculty of Sharia and Law.

11/9/2024 ‫انتهت كتابة هذه المذكرة بحمد هللا يوم‬

‫على يد الدكتور عبد الرحمن حسن وطيري‬

‫أستاذ القانون العام في جامعة مقديشو ورئيس القسم في كلية الشريعة والقانون‬

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