Law of Persons Reviewd

LAW OF PERSONS INTRODUCTION. The word „person‟ is derived from the Latin word „persona‟ which has a long history but eventually came to be used in the sense of a being who is capable of sustaining rights and duties. The layman has a different concept of what is meant by the term „persons‟ than the concept which exist at law. A layman thinks only of natural persons, but the law thinks of also of legal persons. In the legal sense, a person is not necessarily a human being. Legal persons are persons who are given legal personality by the law. The term also includes certain artificial entities, which are given fictitious entities by law. One of the main purposes of giving these artificial persons a legal personality is to enable easier enforcement of rights and liabilities. Personality therefore has a wider significance than just humanity. Kenya laws recognise two persons upon whom it confers rights and imposes obligations. These are: Natural Persons. Artificial persons.

NATURAL PERSONS. The natural persons are human being like you and me. We exist in fact and in law. We are capable of having rights and obligations under the law. However, in law there may be men and women who are not persons at law e.g. in earlier Roman law, slaves were considered as mere things (chattels) without rights and duties. Likewise, in Roman law, an exile or a captive imprisoned by the enemy forfeited his rights but if he was pardoned or freed, his personality returned to him. In English law, if a person became an outlaw, he lost his personality and became incapable of rights and duties. According to Holland, the requisites of a normal human being include the fact that he must be recognized as possessing a sufficient status to enable him to possess rights and duties and must be born alive.

ARTIFICIAL PERSONS. These are those to whom the law has given a fictitious legal personality. They are real or imaginary beings to which personality is attributed by law by way of fiction where it does not exist in fact. The legal personality given on these entities enables them to incur rights and liabilities, which may be enjoyed as in the case of natural person. Odiwuor-KellyOdiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer Advocate/Lecturer 0723 216650

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They are also called Juristic persons. They only exist in contemplation of the law, not by fact. These persons are referred to as a corporations or incorporated associations. The main distinguishing feature between natural person and artificial person is perpetual succession. When a natural person dies his rights and obligations dies with him but an artificial entity with legal personality o f its own never dies. Example: The occupant of the office of the president may die, but the office never dies.

CORPORATIONS. A corporation consists of a body of persons who collectively form one, but who have a separate existence distinct from that of the corporation itself. The corporation has therefore, a legal personality of its own distinct from that of its members. The individual members have rights and liabilities of their own apart from those of the corporation. The corporate body is different in that it has perpetual succession, it never dies and has a common seal by which to authenticate its acts, it can sue and be sued and own and transfer property in its name. Unlike human beings, a corporation can only act through its agents. The members may change but the corporate body does not. There are three essential requirements for the existence of a corporation i.e. there must be a group or a body of human beings associated for certain purposes, there must be organs through which the body or the group acts and a will is also attributed to the corporation by legal fiction. There are two classes of corporation namely: a. A corporation sole and; b. A corporation aggregate. A corporation sole consists of a legally established office distinct from the holder. It consists of an incorporated series of successive persons having perpetual succession. It can be held by only one person at any time, after which he is succeeded by another person who will henceforth occupy the office and discharge the duties, and exercise the powers of the office e.g. Office of the President, Public trustee, Bishop etc. They have powers and obligations conferred upon them by statute, but these are distinct from the person who occupies the office. Even though a corporation sole is perpetual, there may be periods in which there may be no one in existence in whom the corporation resides and is visibly represented. A corporation sole does not require a seal but a corporation aggregate can act or express its will only by a deed under a common seal. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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Corporations aggregate consist of a group of persons such as a limited company or statutory corporation, or Co-operatives registered under their respective Acts of Parliament. The statute creating the state corporation would give it a name, stipulate its composition, prescribe its powers and duties etc. A corporation aggregate is an incorporated group or body of persons united for the purpose of advancing certain ends or interests. Once a corporation has been registered it confers on the corporation legal rights, duties, and obligations (i.e. it acquires legal personality) and so it can be sued and also sue. This will then be regardless of whether it is a state corporation, public or private company, or a co-operative society. A good example is often by reference to the celebrated case of Solomon Vs Solomon Co. Ltd. 1897. Solomon was a sole proprietor operating a leather merchants business. Solomon sold his business for 30,000 Pounds to a company where he and six of his family members were shareholders. Solomon was the majority shareholder holing 20,000 Pound of fully paid up shares worth 1 Pound each wherein his wife and 5 of his sons held 1 share each. Solomon also took debentures of 10,000 Pounds charged on the company‟s assets. The company later became insolvent and its assets were not enough to pay in full either the debenture holder or creditors. As a result Solomon paid himself 10,000 Pounds on the debentures he held and nothing remained for the unsecured creditors. The creditors claimed that they were entitled to be paid first before Solomon paid himself the debentures on the ground that Solomon and company w ere one and the same thing as he practically owned and managed the company single handedly. The court held that accompany once formed becomes a legal entity of its own and as a secured creditor Solomon had a preferential right to be paid first. Corporations may sue and be sued in their own names for tort. They are liable for torts committed by their servants or agents. This is because corporate bodies have legal and separate personality of their own which is distinct from that of the individual members constituting them. However, if a servant of a corporation commits a tort, which is Ultra Vires (beyond powers) the corporation, then the corporation is not liable. Moreover, corporations are not liable for some torts of a personal nature e.g. defamation battery, etc.

CREATION OF CORPORATONS. They may be crated in any of the ways below:

1. By Act of parliament: A corporation that is created this way is commonly referred to as statutory corporation e.g. Kenya Ports Authority, Tea Board of Kenya, Kenya Railways Corporation, National Oil Corporation, KASNEB etc. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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A statutory corporation awes its existence to the statute that created it. The statue that created it gives it a name stipulates its composition and prescribes its powers.

2. By Charter: By an Act of Parliament, the President may be empowered to grant a charter for establishments of a private company. Common example in Kenya is in the setting up of private Universities. The Act would provide for the publication of the Charter, and the institute established by the charter shall be a body corporate by the name cited in the charter. 3. By Registration: These are registered companies, which are created under the companies Act. The companies are limited and can either be public or private. These companies are guided by the provisions of the Companies Act Cap. 486 laws of Kenya. Persons who wish to form limited companies have to register the company with the registrar of companies. Certain documents must be delivered to the registrar of companies at their registration:Memorandum of association Article of association Statement of nominal capital Declaration of compliance Upon registration of the company, the registrar issues a certificate of incorporation, which is the birth-right of the company.

CHARACTERISTICS/ CONSEQUENCES OF INCORPORATION / REGISTRATION. 1. Perpetual Succession: Upon incorporation, the company goes on and on until its life is brought to an end by a process called winding-up. Notwithstanding any change in it‟s members, the company will be the same entity with the same privileges and immunities, estate and possessions. Members come and go but the company continues. It can only be brought to an end through the legal process of winding-up. The death or insolvency of a member doesn‟t result to the death of a company. A good illustration is in the case of Lee Vs. Lee‟s Air Farming Co. Ltd (1961); Lee, who was the principal shareholder of the defendants company, was also its Chief Pilot. He had died in an air crash while working for the company. The question was whether he was a worker. It was held that since he and the company were distinct legal persons, they were capable of establishing a contractual relationship, hence he was a worker. Besides, the Company‟s existence cannot be terminated by the death of Lee. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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2. Limited Liability: A member can‟t be sued or made liable for the debts of a limited liability Company except the unpaid amount that remains unpaid on the shares held. If it is limited by guarantee, then a member can only be called to contribute to the assets of the company the amount he had undertaken to contribute if the company is to be wound up during his membership. 3. Sue and be sued: A company can sue and be sued in its name. Therefore a wrong to /by a company is a wrong to/by its members in Foss Vs. Harbattle , two members of a company filled proceedings against the directors and others claiming that the company‟s property had been m isused by them. The court dismissed the case holding that the proper person to sue is the company. 4. Separate Legal Entity: Upon incorporation, a company becomes distinct from the members who compose it. This is advantageous for the corporation as it remains free from the hazards of all personal misfortunes of the members. This is known as the rule in Solomon Vs. Solomon & Co. Ltd. (1897), where Lord MacNaughten stated “ The company is at law a different person altogether from the subscribers to the memorandum ”. 5. Ownership of Property: A registered company is capable of owning property in its own name. Such property belongs to the company and not to its members. No member can claim himself to be the owner of the company‟s property during it‟s existence or it‟s winding up. In Macaura Vs. Northern Assurance Company Ltd. Macaura a majority shareholder insured the company timber against fire in his own name. The plaintiff brought a claim when the timber was destroyed but the insurance company refused to pay arguing that the policy was void because Macaura had no insurable interest in the timber. The court held that a person can‟t have an insurable interest in a property that doesn‟t belong to him and therefore the plaintiff suit failed. It may be pointed out that the effect of a co- operative society‟s registration will be the same as stated above for a registered company.

PROMOTERS. For a company to be formed there must be some people who bring out the idea of forming and setting it into „ operation. Such people are called promoters‟. Thus, a promoter is a person who does the necessary preliminary work incidental to the formation of a company. In Twycross vs. Grant , a promoter was described as „one who undertakes to form a company with reference to a given project, and to set it going and who takes the necessary steps to accomplish that purpose.‟

Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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To be a promoter however, one does not necessarily need be associated with the initial formation of the company, even one who subsequently helps to arrange floating of its capital will equally be regarded as a promoter. The promoters are required to submit to the registrar of companies the following documents: Memorandum of association. Articles of Association List of Directors. A declaration that all necessary requirements h ave been duly complied with and the directors‟ agreement to act as such directors. When required documents are presented to the registrar and are found to be satisfactory a certificate of incorporation would be issued. This brings the company into existence as separate legal entity.

MEMORANDUM OF ASSOCIATION. The Memorandum of association of a company contains the fundamental conditions upon which alone the company has been incorporated. The main purpose of the memorandum of association is to define the objectives and powers of the company. It informs the members, creditors and all persons dealing with the company and the public in general as to what it‟s formed to d o, its capital and nationality. This document informs the intending shareholder of the purposes for which his money will be used by the company and what the risks are that he‟s taking in making the investment. The memorandum of association regulates the company‟s external affairs while the article of association regulates the company‟s internal affairs. The memorandum of association contains the following particulars: 1. The name of the company with „Limited‟ as the last word of the name of a company limited by shares or guarantee. 2. The registered office of the company situated in Kenya. 3. The objectives of the company. 4. The statement that liability of members is limited in the case of a company limited by shares or guarantee. 5. The nominal authorized capital of the company. 6. The association clause by which persons subscribing to the memorandum of association declare their desire to be formed into a company and to take the shares placed opposite their respective names. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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ARTICLES OF ASSOCIATION. The articles of association are the rules and regulations for the internal management of the affairs of the company. They define the powers of the co mpany‟s officers and establish a contract between the company and the members and between the members inter-se. This contract governs the ordinary rights and obligations incidental to the membership in the company. The articles of association are framed in a way so as to carry effectively the aims and objectives as set out in the memorandum of association. The articles of association normally contain the following provisions: 1. The issue and transfer of shares. 2. Classes and rights of shareholders. 3. Procedure for general meetings and voting rights. 4. Auditing of the books. 5. Methods of dealing with any alterations on the capital. 6. Qualifications, duties and powers of the directors. 7. Borrowings, dividend and reserves. Utmost care must be taken when preparing the articles of association of a company and should not provide for matters in respect of which the company has no powers to exercise.

THE ULTRA VIRES RULE. The maxim ultra-vires means „beyond powers‟. A natural person or a partnership may engage in any lawful business or activity. A corporation can only do what it is authorized to do by the statutes (in respect of statutory corporation) or by the memorandum of association (in the case of a company registered under the company ‟s Act). A corporation may engage only in those activities which: a. Are authorized to be done by the Act creating it. b. Are essential to the attainment of the objects specified in the statute or the memorandum of association. c. Are reasonable and fairly incidental to its objects. Any other business outside the powers of a corporation is „ultra vires‟ and void. If an act is ultra vires to the company, it doesn‟t create any legal relationship to the company and such an act is absolutely void. It cannot be ratified and made binding on the company even by the w hole body of shareholders. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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In Ashby Carriage Co. Ltd Vs. Riche; a company was formed with the objectives to „make, sell, lend or hire railway carriages and wagons‟. The directors of the company entered into a contract to make railways in Belgium. The company agreed with a firm called Riche, that the firm should undertake the work of construction on the company‟s behalf. The contact was later cancelled and Riche brought an action against the company for breach of contract. The house of Lords held that the contract was Ultra Vires and void because construction of the railway line w as outside the objects stated in the memorandum of association.

PRIVATE LIMITED COMPANY Under Section 30 of the Company‟s‟ Act, a private company is one that; a. Restricts the right to transfer its shares. b. Limits its membership to 50 exclusive of past and present employees who become members. c. Prohibits invitation to the public to subscribe to its shares or debentures. There are other requirements relating to a private company i.e., there should be at least two persons to form a private company, a minor cannot be signatory to the memorandum of association.

PUBLIC LIMITED COMPANY This is company that is not a private company. It has the following characteristics: 1. It does not restrict the transfer of its shares. 2. It does not limit the number of its members. 3. It does not prohibit any invitation to the public to subscribe to its shares or debentures. 4. States in the Articles and Memorandum of Association that its „Public Company‟ 5. It‟s registered as a public company.

ADVANTAGES OF A PRIVATE COMPANY. The special privileges of a private company are: 1. Issuing of prospectus and statement in lieu of prospectus: A private company may allot shares without issuing a prospectus or filling a statement in lieu of prospectus with the registrar. A public company must do so. 2. Commencement of Business: A private company can commence business immediately upon incorporation. However a public company must wait for a certificate of commencement of business before it can start any business operations. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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3. Number of Members: To form a private company only two members are needed as directors where as for public company minimums of seven members are required. 4. Statutory meeting and Reports: A private company need not hold statutory meetings and file w ith the registrar the statutory report however a public company must do so. 5. Allotment of shares: A private company can allot shares before the minimum subscription is paid. A public company must obtain minimum subscription before commencement of the allotment of shares. 6. Directors: A private company need not have more than two directors as against a minimum of three in case of a public company. The directors are also not required to file their consent in writing to act as a director, with the registrar within 30days of their first appointment. 7. Profit and loss account: No person other than members of the company is entitled to inspect the profit and loss account of a private company not being a subsidiary of a public company.

DISTINCTION BETWEEN A PUBLIC AND PRIVATE COMPANY. PUBLIC COMPANY

PRIVATE COMPANY.

1. Transfer of shares: Are freely transferable.

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2. Raising of capital: Are allowed to issue its securities to the public in raising capital. 3. Minimum number of directors‟ order to form a company is three. 4. Maximum number: of members is of no limit.

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5. Minimum Share Capital: Provision as to minimum allotted shares capital applies. 6. Commencement of Business: A public company cannot commence business upon incorporation, until it acquires certificate of commencement of business. 7. Restriction on Appointment of Directors: Directors must file written consent or sign an understanding to take up qualification shares. 8. Statutory Meeting and statutory report: Must be filled.

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Shares may be transferred only by consent of all members. Not allowed to issue prospectus and securities e.g. debentures for public subscription. Minimum number of directors is two. Maximum number: of members is 50 and 30 in case of banking company. A private company has no minimum share capital.

- Can commence business immediately on incorporation.

- Rule on registering their consent with the registrar of companies so as to act as directors do not apply. -

9. Purpose of formation: To raise capital from the public.

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10. Minimum number of members: Is seven

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Are not required to hold statutory meeting and file statutory report. Formed to confer separate legal personality on the business of a trader of partnership. Is two.


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11. Prospectus: may issue a prospectus, inviting the

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Cannot issue a prospectus.

public to subscribe to its shares, debentures or deposits

PROSPECTUS. A prospectus means any prospectus, notice, circular, advertisement, offer or invitation offered to the public for subscription or purchase of any shares or debentures of a company. A public company usually raises its capital from the general public by issuing its shares. A prospectus therefore contains the description of shares offered and other necessary details. A copy of the prospectus is filed with the registrar of companies. It is usually printed in the newspaper or may be sent directly to the people interested in the purchase of shares. A statement in lieu of prospectus is a document filed by the public company in cases where either it doesn‟t issue prospectus because it can raise capital without inviting the public to prescribe to it‟s shares or if it issues prospectus but does not allot any shares to the public for subscription because of any reason, for example, that the minimum subscription is not received.

TYPES OF SHARES. The capital of a company is divided into shares, the types of shares are as follows: 1. Ordinary shares: These include all shares, which are not preference shares. They are also called equity shares. They are normally held by the owners of the company. The holders of these shares receive dividends out of profits determined by the directors and declared by the members in the annual general meeting. If there are preference shares, the dividend is paid after the preference shares dividends. The greatest risk of business falls upon them. 2. Preference shares: These shares are also held by owners of the company and form part of the capital of the company with a fixed rate of dividend. A preference shares is one, which is entitled to preference as to a dividend at a fixed rate over an ordinary share, but paid after discharging all liabilities to creditors. There may be several classes of preference shares ranking one after the other. 3. Deferred or founder’s shares: These shares are called deferred shares because the right to receive the dividends on them are deferred until a specific dividend is paid to the ordinary shareholders. These types of shares are given sometimes to promoters in return for their services in floating the company.


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DEBENTURES. When a company wishes to borrow money of substantial amount, from the public, it issues a form to the subscribers known as „debentures‟ . According to Justice Chitty Levy vs. Abercorris co Ltd , a debenture means a document which either creates a debt or acknowledges it, and any document which fulfils either of those conditions is a debenture. Thus a debenture is an instrument, either under seal or not, which acknowledges a debt for a specific sum for which it purports to be a security. It is usually given upon a charge on an asset of the company by way of security. In which case it is called „secured‟ . Where no security is given, it is called „unsecured‟. Thus a debenture may be: a. Naked „unsecured debentures‟ i.e. giving no form of secu rity. b. Fully or partly secured debentures by: i. Fixed charge i.e. giving a mortgage of a specific asset of the company present or future. ii. Floating charge i.e. giving a charge over the general assets of the company.

LIQUIDATION. It is also called winding up. This is the process by which the company is dissolved. According to Professor Gower , liquidation is the process by which the company‟s life is ended and its properties administered for the benefit of its creditors and members and an administrator called a liquidator is appointed. The liquidator takes control of the company collects its assets, pays its debts and finally distributes any surplus amongst the members in proportion to their rights. Winding up may be done voluntarily by a resolution passed in a general meeting of the members of the company or voluntarily by a court order or compulsorily by order of the court.

UNINCORPORATED ASSOCIATION. An incorporated association is one that has no corporation status i.e. 1. It has no legal personality of its own. 2. It cannot own property in its own name. 4. It cannot enter contract in its name. 5. It cannot sue or be sued in its name. The property owned by an incorporated association is regarded as jointly owned by all its members. The property is of course vested in certain members of the association who hold the property as trustees for the benefit of all persons who are members of the association. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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Thus, any action against such property will be brought in the name of the trustees and any judgment by the court will affect the property rights and liabilities of all members of the association. A tort committed by a member in the course of the association activity is deemed to be the sole responsibility of the member or members concerned as illustrated in the case of Brown Vs Lewis; A committee authorized the repair of a football stand for the use by members of the public. The stand collapsed because the repairs were shoddily done. A member of the public who was injured filed a claim, the committee was held liable instead of all the members of the club. A person who enters into a contract on behalf of the association is regarded to be personally liable for the things they have done in the name of association. In Forthall Bakery Co. Ltd. Vs Wangoe; A group of 45 people who carried on bakery business employed Wangoe as a manager but later dismissed him. The court terminated the suit when it was pointed out that the corporation (association) had not been registered under any status. The corporation had sued Wangoe to recover a certain amount alleged to be owed to the business. The court held that the association must be treated as non-existent from the legal point of view and therefore cannot sue in its name. As a general rule, these associations may sue or be sued through their principal officers. Examples of an unincorporated company are as follows: 1. Sports organizations e.g. AFC Leopards football club, Gor Mahia Football club etc. 2. Trade unions registered under Trade Unions Act. 3. Society registered under Societies Act. 4. Partnership registered under Partnership Act. The law which governs these associations is the law which regulates the activities they engage in. Following are consequences of a firm not being r egistered: 1. The debts of the firm are debts of members. 2. It cannot enter into a contract or own property. 3. It cannot sue or be sued in its own name. 4. The death of one of the partners results in the dissolution of the firm unless there is an agreement to the contrary.


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PARTNERSHIP. A partnership means the relationship, which subsists between persons carrying on a business in common with a view of profit- Section 3(1) of the Partnership Act Cap. 29. For there to be a partnership, the following factors must be established: 1. A voluntary association of persons. 2. Carrying on business (trade, profession or occupation e.t.c) 3. The business is carried out in common. 4. Purpose is to make Profit. A partnership may be formed by any kind of agreement, simple or under deed or it may be implied from the conduct of the parties concerned. Although partnership agreements do not have to be formal they are usually in writing and the document containing such agreement is the deed of partnership. Persons who have entered into partnership with one another are collectively called a firm, and the business is carried on under the firm-name. A firm may carry on business under a name which does not consist of the surnames of the individual partners. In this case, the firm‟s name has to be registered under the Registration of business names Act (Cap 499) and must comply with the requirements of the Act. Following are consequences of non-incorporation of partnership a firm: The debts of the firm are the debts of the individual partners. For this, they are liable individually and severally for all debts and obligations contracted in the firms name while he is a partner. The death of any partner results into dissolution of the firm unless otherwise provided. The firm cannot own property otherwise than in the name of a member. Such member is therefore entitled to insure the property in his own name. This is because firms have no legal existence.

Characteristics of Partnerships 1. Membership: Consists of 2 to 20 members, for banking partnerships, ten persons. The court struck out a case brought by the plaintiff for recovery of monies as the partnership had 45 members in The Fort Hall Bakery Supply co. vs. Frederick Muigai Wangoe (1959)E.A 474. The court held that the plaintiff had no legal existence. 2. Liability: Liability of partners is generally unlimited. 3. Agency: each partner is an agent of every other and the firm itself. 4. Property: Any property is jointly owned. 5. Existence: Death, bankruptcy or insanity of a partner may lead to dissolution. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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6. Utmost good faith: Contracts of partnerships are contracts of uberrimae fidei. 7. Sue or be sued: A partnership may sue or be sued in its own name as a matter of grace.

Advantages of partnership: 1. 2. 3. 4. 5. 6.

Sharing of losses by the par tner. Sharing of the workload between partners. It has a wider capital base than sole proprietorship. Enables sharing of specialized skills. It is more flexible than a company in its daily operations. It is easier to form than a company.

Disadvantages of partnership. 1. Unlimited liability: This may make an innocent partner loose his private assets when attached for the firm‟s liability for his colleagues‟ negligence or carelessness. 2. Sharing profits reduces amounts due to individual partner. 3. Death, Bankruptcy or insanity of other member may lead to dissolution. 4. Disagreements often delays decision-making. 5. Over-reliance on single partner in managing the firm. 6. Hardworking partners are not rewarded appropriately. 7. A single partner‟s mistake can affect all other partners.

DISSOLUTION. Dissolution of a firm may be voluntary or by order of the court.

Voluntary Dissolution. This takes place by: 1. Mutual agreement at any time. 2. At the expiry of any fixed term, if the partnership was created for a specific term. 3. By completion of a venture for which the partnership was created. 4. By any partner giving notice to others of his intention to dissolve the partnership where the partnership was created for undefined time. 5. By death or insolvency of one of the partners. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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6. By illegality that is to say if any act happens which makes the business of the firm unlawful to be carried on in the partnership. 7. By the exercise of an option by the partners if one of them charges his share in the partnership property to the court in respect to his personal separate debt.

Dissolution by Court. On application by a partner, the court may declare dissolution of the partnership in any of the following cases: 1. Where a partner becomes of unsound mind. 2. Where a partner other than the partner suing becomes permanently incapable of performing his part of the partnership contract. 3. Misconduct of a partner calculated to prejudice the carrying on of the business. 4. Persistent breach of the agreement. 5. When the business of the firm can only be carried at a loss. 6. Transfer of interest by a partner. 7. When the court thinks that it just and equitable to dissolve the partnership e.g. where there are two partners only and they are not in talking terms.

INFANTS OR MINORS. Age of Majority Act Cap. 33 laws of Kenya provide that a person shall be of full age when he attains eighteen years. As a general rule, minors can sue and be sued in tort. The age of criminal responsibility begins at the age of eight years. An infant is not eligible to vote until he has attained the age of eighteen years and whose name appears on the r egister of voters (Constitution of Kenya, section 43(1). The general rule of law is that minority is no defense in tort. Therefore minors and infants may sue and be sued in the same manner as any other person. But the age of an infant may be relevant in some specific tort e.g. where intention, malice or negligence are involved because he may not have reached the age of mental development where he may be responsible for his negligent acts- they are doli- incapax . An infant may not also be liable in tort in a case arising out of breach of contract. Generally a parent or a guardian is not liable for the torts committed by his children unless he authorised the tort. But he is liable for torts committed by the children in negligence. Infants or minors incapacity is more relevant in terms of procedure of enforcing the law for or against them. They can sue by their next of friend (a parent or guardian ad- litem ). Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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Infants can own personal property. Section 113 (1) of the Registered Land Act (Cap 300) recognizes that an infant can be registered as the owner of land, otherwise, it is apparent that an infant can not own immovable property. The law refers to a child born out of wedlock as illegitimate even though such a child is also recognized by the law of Succession in Kenya as a „Child‟ and thus entitled to claim on his father‟s estate. An illegitimate child also has a claim under the Fatal Accidents Act (Cap 32) just like a legitimate child. There also exist various provisions of the law relating to adoption of a child and also guardianship as contained in the Adoptions Act and the Guardianship of infants Act respectively.

PERSONS OF UNSOUND MIND. A mentally disordered person is a person who is suffering from such disease of the mind as is likely to impair his judgment. The law recognises that such persons may be exploited or taken advantage of and that some measure of protection is required. Some measure of protection given in the equity jurisdiction of the court so far as property transactions are concerned, but statutory provisions for the care of such persons their custody and the management of their estates is provided for in the Mental Treatment Act Cap. 248. A mentally disordered person can sue and be sued although in civil actions he must be represented by a Guardian ad-litem. A mentally disordered person does not have the right to vote. Persons of unsound mind are generally liable in tort. But where intention is a necessary element of tort and it is proved that they could not have formed that intent then, they are not liable. The Mental Treatment Act provides that any person who has attained the age of sixteen years may be received as a voluntary patient in a mental institution. A person under that age may be received as such with the direction of a guardian. A magistrate may also make an order for a person to be received in such an institution if the magistrate is satisfied that the person is of unsound mind. The court may also order the property and person of a mentally ill individual to be put under care of either a relative or a public trustee as the situation may deem fit.

THE GOVERNMENT The Government Proceedings Act Cap. 40 makes the government liable in tort as if were a private person of full age and capacity. The Act, at Section 4(1) makes the government liable for: 1. Torts committed by its servants or agents. Odiwuor-Kelly- B. Com, LL.B, Dip-Law (KSL) – Advocate/ Lecturer – 0721 438511 / 0734 438511 / 020 2242206 Eunice A. Kelly- LL.B, LL.M – Advocate/Lecturer 0723 216650

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2. Breach of duties a person owes to his agents or servants as their employer. 3. Breach of common law duties attaching to the ownership, occupation, possession or control of property. The government is also liable for statutory torts i.e. torts arising from breach of a duty imposed by a statute. For the Government to be vicariously liable under the Act above mentioned, the servant or agent must have been personally liable. There are however, certain limitations on the Governments liability in Tort: a). The government is only liable in respect of any act, neglect or default of any officer of the Government. b). The Government is not liable in respect of anything done or omitted to be done by any person while discharging responsibilities of a judicial nature, or connected with the judicial process. c). In proceedings against the government the court cannot grant an injunction or make an order for specific performance but may make a declaratory order. d). The government can refuse to produce documents if a minister is of the opinion that it is prejudicial to the public service on the grounds of public interest. e). No claim in tort can be brought against the government (or local authority) after the end of twelve months from the date on which the cause of action accrued, while not after 3 years in case of contract (Public Authorities Limitation Act Cap. 39).


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Law of Persons Reviewd

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