Introduction to business Law notes

Introduction to Law

  • Meaning of law
  • Significance of law
  • Law and morality
  • Classification
  • Sources of Kenyan law
  • Parliamentary legislation process

Meaning of law

Introduction; It is important that everybody understands law. Law is part of everyone’s life. People should not be ignorant about law. It is necessary for all persons to know their rights and their obligations. Law is a set rules that are applied in a certain community .There are many kinds of law. In this module we are to deal with commercial law that is applied in business .It equips student with skills, attitude that will enable him or her work and apply in business


a) Explain the kinds and purpose of law
b) Distinguish between law and morality
c) Distinguish between civil wrong and criminal wrongs



By Holland; Law is general rules of external human action enforced by a sovereign political authority.
By Panton ;law consists of a body of rules which are seen binding in a certain community by means of which sufficient compliance with the rules may be secured to enable the set of rules to be seen binding.
By Salmon; Law is a body of principles recognized and applied by a state in administration of justice.
Textual; The law of the state consists of those rules of conduct and standards prescribed by people in authority for governing and regulating peaceful relations between members of a particular community or state.

Points to note

Set of rules: Law is a set of body of rules. The rules originate from customs, acts of parliament, court case

Guidance of human conduct: The rules are enforced for the guidance of human conduct. Human beings follow these rules for their own safeguard and betterment,

i. Applied by a community.
The rules apply to certain community, a state or business community.

ii. Change of rules.
Law changes over a period of time, it is not static.

iii. Enforcement
The law must be enforced otherwise it is meaningless .The agencies which enforces law are the police and courts of law.


a) To promote peaceful relations among the members of community.
b) To ensure peace and harmony.
c) To prosecute those who commit criminal wrongs
d) To restore wrongfully taken property.
e) To regulate interactions of commercial dealings among individuals


1. Public law; it is that part of law that governs the relations between the state and it’s citizens. It is that law which the state has an interest. Consist of;

a) Constitutional law; Constitutional law consist of those rules that regulate the relationship amongst the organs of the state; the Judiciary, the Legislation .and the Executive.
b) Administrative law; Administrative law is which relates to actual functioning of the executives and instrument of the government.
c) Criminal law; Criminal law is the law which governs the state and its citizens. It is the duty of the state to protect its citizens. It must prosecute any person who commits a criminal wrong on behalf of the citizens.

2. Private Law \Civil law
It is that law that governs the relations amongst citizens. It is primarily concerned with rights and duties of persons towards other persons .It consists of; Law of contract, law of succession, law of tort, law of property and many others.

3. Substantive law
It consists of actual rules regarding the civil, criminal and other fields of law. It defines civil and criminal wrongs and provides remedies for each type of offence.

4. Procedural law
Consist of rules which determine the manner in which the court proceedings are to be conducted both in civil and criminal cases .This law guides how rights are enforced in civil law and a crime is prosecuted under criminal law.

5. International law
It is that law that governs when foreign element is involved element is involved .It is classified into; public international law and private international law. Public international law consists of those rules which regulate the relations between states. This law is based on treaties, conventions and rules of war .Disputes between states are settled in International court of Justice.
Private international law determines which national law governs a case when the parties are of different state or where a foreigner has committed and offence.


a) Law of contract.
b) Law of Tort
c) Law of property
d) Law of succession
e) Law of Trust

NB; The above divisions of law will discussed in later chapters.


Law and morality goes together. Both guide the human conduct. There are two kinds of wrongs. These are;

a) Moral wrongs
These are wrongs which cannot be enforced by court of law such as, prostitution, lack of respect etc.

b) Legal wrongs
These are wrongs enforced by courts. They are further classified into criminal wrong and civil wrong. Criminal wrong is a public wrong which results to prosecution and punishment of wrong doer. Punishment may be imprisonment or a fine. The Penal Code of Kenya contains all criminal wrongs and details of punishment relating to crimes. Examples of crimes, stealing, robbery, rape etc.


The following are kinds of civil wrongs;

  1. Breach of contract; this is where a contract is made by parties and agree to certain obligations .if one party does not honor the agreement he is said to have breached the contract, the normal remedy are damages . the law aims to put the innocent party as far as possible in a position he would have been if the contract was performed,
  2. Breach of tort; Tort is derived from a French word tortum which means twisted or crooked. Thus a tort is a civil wrong which gives rise to unliquidated damages, that is, damages assessed by the court. Torts are many and varied .Will discuss them in later chapters.
  3. Trusts; this occurs where a person transfers property to another for the benefit of another. The person transferring property is called the settler, the person whom the property is being transferred to is called the trustee and for the benefit of the beneficiary. A trusts imposes a strict obligation on the trustee to administer trust in accordance with the conditions of trust exclusively for beneficiary’s benefit. It is an obligation enforced by courts.
  4. Law of succession; this is the law that determines how property passes on death of aperson to his heirs, succession may be governed by will or by courts.
  5. Law of property; this law deals with nature and extent of rights which a person may have over use of his land or property.


Criminal wrong

  • Is a public wrong
  • The parties are the prosecutor and accused
  • Prosecutor represents the state; the accused is the offender being prosecuted.
  • No action can be compromised by the parties. Only on exceptional circumstances can the prosecutor withdraw the case against the accused.
  • The prosecutor may prove his case against the accused beyond reasonable shadow of doubts. Any sight of doubt must be resolved in favor of the accused. Every person is innocent until proved guilty.
  • Punishment is usually imprisonment, fine or death penalty.

Civil wrong

  • Is a private wrong
  • The parties are the defendant and the plaintiff.
  • The plaintiff is the aggrieved party who is suing while the defendant is the wrongdoer
  • The parties are free to compromise any action brought by the plaintiff .he can withdraw the case against the accused.
  • The plaintiff needs to proof his case against the accused on balance of probabilities.
  • A defendant found guilty on civil wrong is usually ordered to pay damages monetary compensation.


a) Define the term law (.2marks)
b) Explain the kinds of law. (12marks)
c) Explain the purpose law of the in the country. (10marks)
d) Distinguish between criminal law and civil wrong. (10marks)
e) Describe the types of civil wrongs. (10marks)

Kenya applies some laws .These laws has and origin or a source. In this topic the sources of law are discussed.


It is the origin of law. A source of law is said to exist and justified if it has a base and origin that gives law its force and validity.


a) Written – A source of law can be said to be written if contained in a formal written document e.g. Kenya constitution.
b) Unwritten -A source of law is not contained any document e.g. African customary law or U.K constitution.
c) Local – Are those laws made in the country e.g. Legislation.
d) Foreign – Are those laws made outside the country .e.g. English statute.
e) Principal – Are those laws written in a text recognized by the country.
f) Subsidiary – Are those laws made by inferior bodies mandated for that purpose.


Sources of law of Kenya are contained in sect.3 of the Judicature Act (cap.8).These are;

a) The Kenya constitution and amendment.
b) Acts of Parliament\Legislation.
c) Subsidiary\Delegated Legislation
d) The substance of Common law and Doctrine of Equity
e) African customary law.
f) Case law or Judicial Precedent.
g) Islamic law.
h) Specific acts of Parliament of U.K and One act of India.
i) English statute of general application in force in England on 12th august .1897.


A Constitution is a public document which regulates the relations between the state and citizens .as well as the relations among the organs of the state.
It contains those rules that determine the form of government, respective duties and rights of government towards its citizens, respective rights and duties of citizens towards the government. It can be written or unwritten. A written constitution is where the fundamental principles and the law of the land are included in a written formal document. Example is the Kenya constitution. Unwritten constitution is where the laws of the land are not in any formal documenting e.g. U.K Constitution.


The Kenya constitution was originally enacted on 12th December 1963.It was amended on 12th December 1964 in order to establish a Republic with a president as the Head of state. Further amendments have been made. e.g.in1969, I992, .It was reviewed to change the form of government to a multiparty system. Several amendments have through referendum where the citizens were given there mandated to make decisions on the amendment of the constitution.

Today Kenya has a new constitution was passed by citizens in the year 2009and promulgated in 2010 May by the President .It contains new laws to suit the political and economical growth. The Kenya constitution is long. It contains eighteen chapters; these are;
CHAPTER ONE: Sovereignty of the people and supremacy of constitution
CHAPTER TWO: The Republic
CHAPTER THREE: Citizenship
CHAPTER FOUR: The bill of Rights
CHAPTER FIVE: Land and environment
CHAPTERSIX: Leadership and Integrity
CHAPTER SEVEN: Representation of the people
CHAPTER EIGHT: The Legislature
CHAPTER TEN: The Judiciary
CHAPTER ELEVEN: Devolved government
CHAPTER TWELVE: Public finance
CHAPTER THIRTEEN: Public service
CHAPTER FOURTEEN: National security
CHAPTER FIFTEEN: Commissions and Independent offices
CHAPTER SIXTEEN: Amendment of the constitution
CHAPTER SEVENTEEN: General provisions
CHAPTER EIGHTEEN: Transitional and consequential provisions

NB: The constitution is that source of law which other sources of law derive their validity. Thus any law inconsistent with constitution is void. Any law inconsistent with constitution cannot be passed unless the constitution is amended. Amendment is not easy since it must be passed through referendum


Is the second another source of in Kenya second to the constitution. Legislation refers to the law which is made by a body specially constituted for that purpose. Legislation may direct or indirect

a) Direct legislation
This is where the law making body is parliament. Parliament of derives its law making powers from the Constitution. Law made by parliament is known as statute or Act parliament
b) Indirect legislation
This is where an independent body other than parliament makes law on the basis of powers derived from an enabling statute. These bodies make rules .orders. By-laws etc .such bodies include; Ministers, Chief Justice, local council’s .Examples,. The Michuki Rule, Mututho law etc.

Legislation in Kenya

Parliament is the supreme law making body in the country. Section 46 of Kenya constitution empowers the parliament to make laws by passing of bills.


A bill is a proposed act of parliament .It is drafted by a specialist in Attorney General Chamber’s office. It is then introduced to parliament to be debated and discussed. If supported by majority .It becomes law after receiving Presidential assent.

Types of bills
a. Public bill; Public bill is a bill that affects the whole public and usually introduced by the minister concerned.
b. Private bill; It covers interest of a specific community. It is introduced by a minister or Member of Parliament on matters important to him.
c. Private members bill; is a bill introduced by a private member of parliament on matters touching the government

Stages of passing a bill

a. First Reading
Here a formal reading of title of bill is done to give notice of the bill to parliament. A motion is made to pass it to the second reading, Then moved to second reading and a date is fixed by members.
b. Second Reading
This is the most important stage of the bill .The Minister concerned explain its purpose and main policy involved. Every member is allowed to participate in the debate but speaks once. At the of debate the bill is voted for .If supported by majority it is passed to next stage
c. Committee stage
The bill is passed to a committee which is selected in the National Assembly or the National Assembly becomes the committee. The bill is considered in detail clause by clause, sentence by sentence and paragraphs by paragraph .The Minister concerned spends most of time on this stage. The bill is passed to the next stage.
d. Report stage
At this stage the bill is passed back to parliament and date to fix the date of the third reading.
e. Third Reading
During the third reading minor changes are done and parliament is asked to draft the bill in the final form. A motion is passed to read the bill for the third time and it is read
f. Presidential assent
The bill is presented to the President for his assent. When the assent is received the bill becomes law i.e. the Act of parliament. It becomes law of the land and entered in statute book.
NB; the date of commencement is the day the President gives his assent. An order may be given by the minister concerned e.g. the law of succession Act (cap160) was received by the President in 1972 became operational in 1980.


Statutes are drafted by experts who take every wording is exact and free from ambiguity. In some occasions a word or sentence may be unclear .The court will call the High Court to interpret the true meaning at the time of deciding a case. The court normally applies the following rules.

  1. The Literal; This means where wording of a statute is clear and exact it should be taken in its literal meaning.
  2. The golden rule; Sometimes the wording of a statute if taken in its literal meaning may lead to some absurdity or inconsistency or ambiguity, in such a situation the ordinary meaning of words may be modified to eliminate the absurdity or ambiguity.
  3. The mischief rule ;This rule allows the court to examine the purpose the statute in order to discover the mischief or defect in existing law which this particular law was passed to remedy. The judge may adopt a construction which would eradicate the mischief and provide remedy to the innocent party


This is when the parliament gives powers to some bodies to make law. The parliament delegates its law making powers to such bodies as cabinet secretaries, chief justice local authorities etc. the indirect legislation appears in various forms namely;

a) Statutory instruments, rules and orders; these are usually made by cabinet secretaries in charge of government departments .such rules must be submitted to parliament for approval before they are in force.
b) By –laws; these are made by local authorities, public corporations, institutions and such other bodies.

Reasons\advantages to delegate

a) Parliament has insufficient time to legislate on all national matters. By delegating some of its law making powers it may save a lot time to do other things.
b) Parliament may not in session when need for making law arises, It is slow in making law since the bill must pass through all the stages.
c) Some technical matters can be handled efficiently by delegated legislation. Some matters must be handled by experts. Thus they call them to make laws.
d) Future difficulties are better dealt with by delegated legislation. They can foresee the future and thus try to tame and difficult issue.
e) Delegated legislation is flexible since orders if proved impracticable are revoked quickly. A ministerial rule can be withdrawn or amended by the minister who issued it.


a) Ministers are given powers to make policies on matters of principle which must be handled by parliament.
b) Publicity of delegated legislation is inadequate.
c) Parliamentary control is inadequate.
d) Judicial control is inadequate.
e) The delegated powers are so wide such that it creates uncertainty.

Control of delegated legislation

Delegated legislation may abuse powers vested in them by Parliament .Thus there is need for control. It may be controlled by;

a) By Courts
The court controls delegated legislation by application of ULTRA VIRES rule which means “Beyond the powers’, this doctrine is by means of which means exercise control over the subordinate bodies. The court declares the piece of delegated legislation of no legal consequences and declared void if I exceeds powers contained in enabling statute or some presumptions of law ,These are;
i. The people who have been given powers of legislation cannot delegate them to another person. The delegated legislation is a delegate of parliament must exercise its powers personally without delegating to anyone else,
ii. The enabling statute does not give powers to make unreasonable rules or inconsistent with constitution.

b) By Parliament
The Parliament may nullify or declare apiece of delegated legislation void .rules made must be reviewed passed or modified


Common law is unwritten law. It has an English origin from ancient customs of people of England. It was developed by judges on principle of stare decisis this law was not confined to a particular area but administered in whole of England; It does not include the statutory law nor the rule of Equity.
The Judicature Act sec.(3)c. recognizes the Common law as a source of in Kenya to the extent that courts finds them compatible with the needs of people of Kenya .The courts are free to modify or reject the rules of common law and equity.

Common law court

a) The Court of Exchequer; this was first court to be established in 12th century deal with dispute concerning payment of royal revenues.
b) The court of Common Pleas; this was the 2nd court to be established in 13th century to deal with all civil cases and matters concerning land.
c) The court of Kings Bench; this was the last court to be set up in the 13th century. It was called the Kings Bench because the king used to sit over this court. It mainly dealt with criminal matters and civil matters where the crown was a party


It is afresh body of rules .by the side of original law, founded on distinct principles and claiming to supersede the law in virtue of superior sanctity inherent on those principles. Equity means fairness or natural justice. They are set of rules administered and formulated by the court of chancery before 1878 to supplement the common law. The rules of E QUITY was not a complete system but collection of rules which were formulated to remedy defect in common law and to make it more

Development of Equity

The citizens were dissatisfied with the judges of Common law courts. They made appeals to the Kings Council. The petitions were heard by the King or the council. Later due to pressure of work the Ling delegated his work to his Lord Chancellor who was closely connected to legal matters . He was the Kings secretary a minister for all departments a clergy man .He began to decide on appeals applying the rules of natural justice and morality. He identified the following defects in common law;

a. The common law courts did not provide remedies for certain wrongs.
b. Certain wrongs were not recognized. e.g. trespass
c. Remedies provided were damage and were not satisfactory.
d. Common law courts acted partially under the influence of bribes by the other party
e. The procedure of court was cumbersome and restrictive

When the Lord Chancellor heard the appeals he granted the following remedies;

a. Created new remedies such as injunction and specific performance.
b. Recognized certain wrongs such as trust
c. Recognized Equity doctrine of part performance
d. Recognized mortgagors right of redemption
e. The court procedures were simplified.


During the early development of equity, some firm rules were made to be followed by later Chancellors when deciding disputes. These are;

a) He who seeks equity must do equity
b) He who comes to equity must come with clean hands
c) Equality is equity
d) Equity looks at the intent rather than form.
e) Equity looks on what ought to be done not what is done

NB; Incase of any conflict between common law and equity, equity prevails.


These are decisions made by judges on certain cases .According to this doctrine decision made by a superior court binds lower court unless it was repealed or overruled. Therefore judgment made by superior court must be followed so long as the case is of similar nature. The decision of High court binds magistrate courts Judges of High court are bound by decagons made by Court of Appeal. Magistrate court does not create precedent.

Types of Judicial Precedent

  1. Declaratory precedent: A judge applies an existing law without extending it. He merely declares law,
  2. Original precedent : The judge decides a case on the basis of general principles of law if there no other precedent rely on , In this way he lays down an original precedent to be followed in future in a similar case.
  3. Distinguishing precedent: a judge may feel he does not want to apply a precedent since he may do injustice. The judge will lay down his own material facts different from those in hand. He distinguishes the previous case thus creates a distinguishing precedent.
  4. Overruling precedent: it is another way of distinguishing a case. The case is deprived of its legal effects, thus it cannot be applied in future. It is usually done when the judge was wrong.

Principles applied in doctrine of judicial precedent

a. Ratio decindedi; when a judge is making judgment he must give reasons for his decision. They are reasons for decisions which create precedent.
b. Obiter dicta; these are statement made by the way when making judgment. They don’t create precedent. They are comments on the law.
c. Stare decisis ,Means” Let the decision stand” .It is the weight attached to a particular case .It provides that decision made by superior court binds lower courts ,It is a rule made to inferior court,

Advantages of case law

a) Certainty; the doctrine of stare decisis has contributed certainty and consistency of law.
b) Possibility of growth; Case law grows out of practical problems and keeps on changing according to the needs of society.
c) Rich in detail; each principle of law applicable is supported by elaborated judgments of judges, magistrates, lawyers, student to appreciate and apply to practical problems facing them.


a) Rigid; the judges have to follow decisions of superior court this destroys the original thinking of a judge unless he distinguishes or overrules a case.
b) Over subtlety; the concept of binding precedent contributes to judges making artificial precedent to avoid following earlier decisions.
c) Bulky and complex; Much of this case law is contained in a voluminous reports dating from ancient ages. They are referred to when administering justice.


The Judicature Act (cap 8), recognizes African Customary law as a source of law in Kenya. All courts should apply this law guided by the various customs of Kenyan tribes. The customary law originates from traditions and practices of people of Kenya.


a) Applicable to civil cases only.
b) Does not apply to criminal cases.
c) Must pass through repugnant test before application.
d) Should not promote immorality or injustice
e) Should not be inconsistent with any written law.

Applied on the following matters;

a) Land held under customary tenure
b) Marriage, divorce, maintenance or dowry.
c) Seduction or pregnancy of unmarried woman
d) Enticement of or adultery with a married woman
e) Matters affecting status of woman, widows, and children relating to custody, guardianship, adoption, and legitimating.
f) Succession, both testate and intestate.

The rules of Islamic law are derived from Muslim religious Book Quran. It is a source of law in Kenya. It is applied in Kadhi court. The parties must profess Muslim religion. It settles disputes relating to;

a) Personal status
b) Marriage
c) Divorce
d) Inheritance

NB; Specific Acts of parliament of U.K. and One Act of India ,English statute of general application in England are source of law in Kenya so long they are compatible with needs of people of Kenya. The courts are free to modify or reject them.


a) Explain the various sources of law in Kenya (20marks)
b) In your own words explain briefly the history of Kenya constitution (10marks)
c) Explain the stages of passing bills in Kenya (12marks)
d) Explain the doctrine of judicial precedent (10marks)
e) Explain the development of law of equity (12marks)
f) African customary law is a source of law in Kenya. Explain the limitations of this law.
g) Explain the advantages and disadvantages of delegated legislation (20marks)
h) Explain the advantages and disadvantages of case law. (8marks)
i) Explain the defects of common law which brought about the growth of equity law

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