Hamidu M. Mussa,(2022).

The Practical aspect of commercial law in Tanzania: A student Training Manual

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2022
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
PREPARED BY HAMIDU M. MUSSA
 PRACTICAL ASPECT IN COMMERCIAL LAW

Introduction
A person may establish a business through different forms of business like Sole
proprietorship, partnership, joint venture or company.
In forming a business you are supposed to choose the legal structure for your business. In
identifying the legal structure you have to consider the following
 Who will be the legal owner of the business
 Who is the legal owner of the business
 What are the legal responsibility and right of the owner
 How effective is the business structure will protect you from liability and legal action.
Example In sole proprietorship you may independent liability. in partnership you can
be sued Jointly
 How are you going to be involved into the business, directly or indirectly E.g. you want
to be involved in direct control of your business, in this situation you can form a Sole
proprietorship. If you want to share the liability you can form a Company
 Decision making issues, in case of dispute how is going to be resolved. Example you
can choose a Sole proprietorship if you want to make decisions on your own. If you
want to make jointly decision you can form a Partnership, also you can form a
Company where there will be number of directors and shareholders who have a power
in making decisions
 Possibility of expanding the business in the future. Example Partnerships into
company, private company into public company
 Availability of source capital. Initial capital? How to raise it?
 Assets ownership. You want to own properties individual form a sole proprietorship,
property ownership jointly form a partnership

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 DIFFERENT TYPES OF LEGAL ENTITIES IN TANZANIA
SOLE PROPRIETORSHIP, PARTNERSHIP AND JOINT VENTURE IN
TANZANIA
A. SOLE PROPRIETORSHIP IN TANZANIA
A Sole proprietorship or sole traders
 A sole proprietorship is a business conducted by one individual.
Law Regulating Sole Proprietorship in Tanzania
a. The Business Name Registration Act, Cap 213
b. The Business Activities Registration Act, Cap 208
c. The Business Licensing Act, 1972
Legal Status of sole proprietorship
 Is a sole trader a legal entity? The answer is in negative, it is not a legal entity
rather a business form whereby the owner, i.e. the trader can sue and be sued in
relation to the activities or business.
 There is no distinction between the business owner and the business. In case of
liability the liabilities go to the owner.
Advantages of Sole proprietorship
 Simplicity of formation. It is easy to establish
 flexibility of management
 The sole traders accumulate all profits alone. This is because he or she does not
share his or her business with any other person.
 The tax payable is low compared to other forms of business

Disadvantages of Sole proprietorship

 involuntary termination upon proprietor’s death
 unlimited liability of sole proprietor
 The business may end at any time. There is no formal winding up procedures
 The proprietorship absorb all the losses himself or herself
 The capital to raise is limited to personal funds and small loans hence create risk to
the business 3

REGISTRATION PROCESS OF SOLE PROPRIETORSHIP IN TANZANIA

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The sole proprietor registration process can be done online.
1. First of he or she need to have a National Identity Number (TIN)
 If the individual has National Identity Number (NIN) the application can be made online
by visiting TRA Website www.tra.go.tz, select Online TIN Registration and follow steps
as the system directs.
 However, if the individual is requesting Business TIN, the Online TIN applicant must
visit physically nearby TRA office (having lease agreement/title deed, introduction
letter from local Authority) to collect TIN Certificate and provisional tax assessment
and Tax Clearance

2. Registration of business name. To start the registration process, create a profile on

the BRELA official website. When you create a profile, a name registration card will
open for you to fill out. The process takes about 30 minutes. Registration continues
with the same profile. When you fill out the form, you need to refresh the page and
then print and sign it. After that, you send the signed form to BRELA. The fee structure
can be found on the official website.

3. After registration of business name the applicant will be required to apply for business
license from the Trade office in District, Municipal, City and the Ministry of Trade and
Industry depending on the type of business.

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 PARTNERSHIP LAW IN TANZANIA
The law which governs partnership in Tanzania is Part X of the Law of Contract Act (LCA),
Cap 345. R.E 2019
Among other things, this law provides for the meaning of partnership, the formation of
partnership, duties, and rights of partners, partnership property, dissolution of the partnership,
etc.
Meaning of Partnership
A partnership is defined under section 190 of the law of contract Act, [Cap 345, R.E 2019] to
mean “the relation which subsists between persons carrying on business in common with a
view of profit”.
 Persons who have entered into a partnership with one another are called collectively
as “firm” and the name under which their business is carried on is called the ‘firm’
name. [S 190 (2)]
Essential elements of the existence of Partnership
From Section 190 above, for the partnership to exist the following elements must be there
a. There must be a relationship. As per section 191(1) the relationship between partners
must arise from contract and not status i.e. the relationship between partner is the
contractual relationship
b. Such relationship subsists between people. Section 463 provides that a partnership
must consist not more than 20 persons. However for partnership for conducting
professional services like lawyers, accountant and those who work with stock
exchange there can be more than 20 partners
c. Carrying on business. The primary purpose of partnership is to carry on business and
not charitable one
d. Carrying of business in common
e. Carrying of business with the view of making profit
Formation of Partnership
A partnership is formed/created by an agreement among the prospective partners [s. 191 (1)].
The agreement can either be oral or written. The written agreement for the formation of a
partnership is known as a partnership agreement or partnership deed or deed of
partnership 5

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The law expressly disqualifies the minor from being a partner in a firm. [s.211] as far as
partnership arises from an agreement the following persons are also disqualified; persons of
unsound mind, bankrupt, etc.
Contents of Partnerships deed
a. Name of the firm, partners and address of the partners
b. Nature of the business and place where the business is carried
c. Date of commencement of partnership
d. Duration of partnership
e. The amount of capital must be contributed by all
f. Ratio of sharing
g. Salaries, commissions if payable to partners
h. Division of task
i. Powers duties and responsibility of each partner
j. Rules in case of retirement, death and admission of new partner
k. Expulsion of partners rules
l. Not to carry competing rules
m. Dissolution of partnership rules
n. Arbitration clause
Example you have been approached by the clients who want to establish a partnership
business for catering services for 45 days in the Qatar World Cup 2022. What thing to include
in drafting a partnership deed.
Answer. You as an advocate when drafting a partnership deed you will consider the following
 Commencement of partnership
 Duration of partnership
 The amount of capital
 Salaries, commission of payable to partners
 Division of tasks
 Powers, duties and responsibilities of each partners
 Dissolution of partnership
 Dispute resolution procedures

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TYPES OF PARTNERS
There are various types of partners: –
a. General Partner/ Active/ managerial partner
 This is a standard type of partner who has a right to participate in the management of
the partnership and the right to share in the profit as well as being liable to the
liabilities of the partnership to the fullest extent of his personal assets unless there is
an agreement between himself and the other partner(s) that he should not.

b. Sleeping/dormant partner
 A partner who puts money into the firm but wishes not to have an active role in the
management of the firm. However, he has the right to share the profits and respond to
the liabilities of the firm.
 If he does take part in the management of the firm he would cease to be a dormant
partner and become a general partner.

c. Limited partner
 This partner has a right to share the profits of the partnership but has no right to
participate in the management of the firm. His liability to contribute is limited to the
amount of capital originally he agreed to contribute.

d. Quasi-partner/partner by holding out (estoppel)

 This is not a partner by agreement but cannot be precluded from denying that he is a
partner due to his previous conduct and statement.
 The usual way in which this happens in practice is when a person allows his name to
appear on the firm’s letter heading, or on the lists of partners for inspection, whether
that person is or is not a full partner, he may be sued by a client or creditor who has
relied on the fact that he was a partner.
 However to become a partner by holding out (or estoppels) the person held out must
know that he is being held out as a partner and if he knows it he must be shown that
he consents to it.
 The person who is held out is liable to a client or a creditor who has relied on him
being a partner.
 However, in HUDGELL, YEATES, AND CO V WATSON (1978), the court said that
the true or actual partners could also be liable to such a client if they themselves were
responsible for the holding out or knowingly allowed holding out to take place. 7

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 e. The Salaried partner
 This is quite common today, at least in professional practices of, for example, solicitors
and accountants to offer a young assistant a salaried partnership without the assistant
putting any money into the firm as the general (equity) partner does.
 Normally these salaried partners are paid a salary just as an employee is with tax and
national insurance deducted from it.
 They are not partners for the purpose of dissolving the firm. If they want to leave they
do so by serving out their notice or getting paid instead.

Duties and Rights of Partners

Duties of partnership are divided into two categories, i.e Duties and Rights between
partners themselves/inter and Duties and Rights between partners and third party
Duties and Rights between partner themselves/inter see
a. A partner has to take care of the property, rights, goodwill, and interest in property
acquired by a partnership. [s. 195 (1)].
b. To carry on the business of partnership for the greatest common advantage, to be just
and faithful to each other, and to render true accounts and full information of all things
affecting the partnership to any partner or his legal representatives [s.192 Cap 345]
c. Fiduciary duty as expounded under section 196 of Cap 345
d. Every partner has a right to have access to and to inspect and copy any of the firm’s
books.
e. all partners are entitled to share equally in the capital and profits of the firm’s business
and must contribute equally towards its losses
f. Be indemnified by the firm on payment made and personal liability incurred when
working for the firm.
g. Indemnify the firm for any loss he has caused.
h. Rights are provided under Section 194 of the LCA

Duties and Rights between Partners and Third Parties

Every partner is an agent of the firm and his other partners for the purpose of the business of
the partnership, and the acts of every partner did act for carrying on business in the usual way
of the kind carried on by the firm bind the firm and his partners. [s. 201(1) and Section 201 (2)
8
the acts where a partner will not be regarded as an agent unless there is express authority
customs or usage.

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  Every partner has a duty to act with due diligence and skill when dealing with third
parties.
 As per S. 204 of the Law of contract Act, provide that “Every partner is liable to
compensate third persons in respect of loss arising out of penalty incurred by wrongful
act or omission of any partner acting in the ordinary course of business of the firm or
with the authority of the other partners.
 MELITA MEYASI V NBC 1977 LRT NO. 42
S. 202 any act executed in the firm name in a manner showing intention to bind a firm is
actually binding on the firm and all partners.
Partnership Property
All property and rights and interests in a property originally brought into the partnership stock
or acquired by purchase or otherwise, on account of the firm, or for the purpose and in the
course of the partnership business, including the goodwill of the business, are a partnership
property and must be held by the partners for the purposes of the partnership and in
accordance with the partnership agreement, or failing such agreement the provisions of
section 195 (1) of the Law of Contract Act
Properties that may be employed in partnership business belong to the following categories;
 Property that belongs to the partners as a firm – this is partnership property
 Property that belongs to the partners as co-owners but is not partnership property
 Property that belongs to individual partners
It is therefore important to determine which category of the property employed by the
partnership belongs.
In MILES V CLARKE (1953) 1 ALL E.R 779

EXPULSION OF PARTNERS
The law is to the effect that the partner will be expelled by other partners from the firm if the
power to that effect has been conferred by agreement. s. 199 LCA.
a. If the expulsion is challenged in court the judge must see that the majority expulsion
clause has not been abused.
b. It must be shown the complaint which is said to allow expulsion is covered by the
expulsion clause; 9
c. That the partner expelled was told what he had done wrong and given a chance to
explain. In BARNER v. YOUNG a partner who was living with a woman to whom he
was not married continued to do so after becoming a partner.
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 There was nothing to show that this was damaging to the firm business. Even so, he
was expelled by his fellow partners who refused to tell him why they were doing so.
The court held that his expulsion was unlawful and ineffective.

d. That those who exercised the powers of expulsion did so in all good faith.

For example, in BLISET v. DANIEL (1853) a partner was expelled but he had done
nothing to hurt a firm, but the partnership agreement said that a majority of partners
could buy out another. The motive of the other partners was just to get a bigger share
of property and profits.

The court held the expulsion not effective as was done in bad faith.

DISSOLUTION OF PARTNERSHIP
There are two ways through which an existing partnership may come to an end that is Extra-
Judicial Dissolution of Partnership and Judicial Dissolution of Partnership.
EXTRA-JUDICIAL DISSOLUTION OF PARTNERSHIP.
Extra-Judicial Dissolution of Partnership takes place in the following situations;
a. entered for a fixed time, by the expiration of that time [s.212(1)(a)]
b. If entered for a single venture or undertaking, by the termination of that venture or
undertaking [s.212 (1)(b)] see FLORENT RUGARABAMU V. HASSAN MAIGE
GORONGA [1988] TLR 243.
c. If entered into for an undefined time, by the partner giving notice to the other or others
of his intention to dissolve the partnership [s.212(c)]
d. On the death or the bankruptcy of any partner [s.213].
e. On the happening of any event which renders the business illegal [s.214].
JUDICIAL DISSOLUTION OF PARTNERSHIP
Judicial Dissolution of a Partnership occurs when partners apply for an order in the court of
law under the following grounds:
a. A partner becomes of unsound mind. Section 215 (a) of LCA
b. A partner becomes incapable of performing his part of partnership contacts. The
situation must be permanent. 215 (b) of LCA. Also in WHITEWELL v. ARTHUR (1865) 10
a partner was paralyzed for some months; he had recovered when the court heard the
petition and it could not grant dissolution.

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 c. Partnership agreement often contains express clauses which allow dissolution after a
stated period of incapacity. In PEYTON v. MINDHAM (1972) the time for incapacity
allowed by the clause was nine months.
d. When a partner has been guilty of misconduct, which goes to the root of the business.
This can be illustrated by the case of ESSEL V HAYWARD (1860) where a solicitor
partner misappropriated 8000 pounds of trust money in the course of his duties as a
partner.
This was a ground for dissolving a partnership for a fixed term. It may be outside
conduct like a criminal act that ultimately makes the partner be convicted of fraud or
misconduct.

e. A partner willfully and persistently commits a breach of the partnership agreement or

conducts himself in such a manner that it becomes difficult for others to carry the
business with him.
f. When the business of the partnership can only be carried out at a loss. If this is
temporary the court will not grant dissolution as was in the case of HANDYSIDE v.
CAMPBELL (1901) a sound business was losing money because the senior managing
partner was ill. He asked the court for dissolution; the court did not grant it as the other
partners would manage it.

NOTICE OF DISSOLUTION OF PARTNERSHIP

On dissolution of partnership or retirement of a partner, any partner any notify the same and
may require the other partner or partners to concur for that purpose in all proper and
necessary acts if any, which cannot be done without his or her concurrence. Section 217 of
Cap 345
As unless proper notice of dissolution is given partners may be estopped from denying liability
for debts contracted in the firm name by their former co-partners, it is necessary that proper
notification should be made in every case.
An advertisement as was said in RAMBAI & CO. (UGANDA) LTD. V LALJI RATNA AND
ANOTHER (1970) E. A 106 (U) in the Gazette shall be notified as to persons dealing with the
firm before the date of the dissolution or change so advertised.
In GOLDFARB V BARTLETT AND KREMER(1919) 122 L.T 588 the question was whether
the notice of dissolution given to a continued partner after the dissolution of the partnership 11
binds the partners who had retired from the partnership.

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The judge said there seems to be no express reported decision on the point … there are
observations in WOOD v. BRADDICK (1808) that tend to the conclusion that a retiring partner
is bound by the notice given to the continuing partner.
In Notes to Chalmers’ Bills of Exchange, (8thedition, p. 182) it is stated that notice to one
partner after dissolution is sufficient.
EFFECTS OF THE DISSOLUTION OF PARTNERSHIP
After the dissolution of the partnership the authority of each partner to bind the firm and the
other rights and obligations of the partners continue so far as may be necessary to wind up
the affairs of the firm and complete transactions initiated before dissolution.
The case of GULAMALI WALJI HIRJI v. MRS SHABAN WALJI AND ORS (1972) HCD 230;
the case reiterates section 218 of the LCA that on the dissolution of the partnership
relationship to complete winding up, and complete transaction began before the dissolution;
also the time to have a full account of a partnership in accordance with section 192 of the
LCA

The right of the partners with regard to the property where the partnership is dissolved
1. be paid out of profit, then out of capital, and finally if necessary, by the partners
themselves in the proportion in which they agree to share the profit
2. The assets of the firm must be applied in the following order;
a. The debts and liabilities of the firm to non - partners
b. Paying to each partner ratably what is due from the firm to him for advances as
distinct from capital
c. Paying each partner ratably what is due from the firm to him in respect of capital.
3. In event of there being a residue, it is divided into the partners in the proportion in which
profits are divided.
4. Similarly, if the assets are not sufficient to repay the partners’ capital in full, the deficiency
must be borne by the partners in the same proportion as the profits would be divided
[GARNER V MURRAY (1904) 1 Ch. 57]
PAYMENT OF THE FIRM DEBTS
Where there are joint debts due to the firm and also separate debts due from any partner, the
property of the firm shall be applied in the first instance in payment of debts of the firm, and if
there is any surplus, then the share of each partner shall be applied in payment of his 12
separate debts or paid to him.

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The separate property of any partner shall be applied first in the payment of his separate
debts, and the surplus (if any) in the payment of the debts of the firm. Section 225 of Cap 225
Goodwill in a dissolution of a partnership
The assets include not only the stock–in–trade and book debts, furniture, tools, machinery,
etc., but also intangible, but often very valuable, property, called goodwill. It is saleable
property.
Goodwill is public approbation that has been won by the business, and that, is considered a
marketable thing; it is the probability of the customers or clientele of the firm resorting to the
person(s) who succeed in the business as a going concern.
The value of the goodwill of a dissolved partnership as a saleable commodity is considerably
decreased by the rule laid down in the case of TREGO v. HUNT (1896) AC 7 namely, that the
sale of it does not prevent the vendor from carrying on the competing business with the
purchaser, but quondam partners may be restrained by injunction from soliciting any person
who was the customer of the old firm.
The vendor may be prohibited from carrying on business under the name of the old firm or
from representing themselves as the continuing old firm, (Underhill, Principles of Law of
Partnership, Butterworth (1966) p 121-123)

LIABILITY OF PARTNERS IN CASE OF CONTRACTS AND TORTS

 The liability of partners in respect of contract are jointly and several liability.
 The liability of partners in respect of firm tort’s are jointly and several liability
 See section 201,202,203,204,205,206,207,208, 209 and 2010 of the LCA

13

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 A PARTNERSHIP DEED
What is a partnership deed?
A partnership agreement or Deed of partnership is an agreement between two or more
persons who wish to do business in form of a partnership.
 The aim of the partnership agreement is to lay down terms and conditions for the
smooth operation of the partnership business.
 A person who has entered into a partnership with one another is called collectively a
“firm”.
Importance of partnership deed
The following are the importance of a partnership deed
a. It oversees and manages the partners’ obligations, rights, and liabilities.
b. Prevents conflict between the partners.
c. Prevents partners from being confused about the profit and loss distribution ratio.
d. The obligations of each partner are clearly articulated.

Contents of Partnership Deed

The deed of partnership contains terms and conditions for carrying out business in a
partnership firm. Among other things, it must show
a. Title of document i.e PARTNERSHIP DEED
b. Date
c. Partners full name
d. Partners address
e. Name of firm
f. Date of commencement of the partnership
g. Office and address of the firm
h. The business of the firm
i. Source of capital
j. Duration of the business (if any)
k. Duties of partners
l. Rights of partners
m. Dispute resolution mechanisms in case of conflicts among partners
14
n. Properties of the firm
o. Dissolution of partnership
p. Partners remunerations’
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 q. Partnership finance and accounts
r. Procedures when one partner retire
s. Procedures when a partner dies
t. Procedures when a partner becomes insolvent

SAMPLE OF PARTNERSHIP DEED

DEED OF PARTNERSHIP
THIS DEED OF PARTNERSHIP made the……day of October, 20…
BETWEEN
……………………………….of …………………………(hereinafter called “the first Partner”) of
the one part
AND
……………………………….of………………………………. (Hereinafter called “the second
Partner”) of the other part
WITNESSETH that the first Partner and the second Partner (hereinafter jointly called “the
Partners”) shall become partners in the business of dealing in lime on the following terms:-
1. Partnership shall be deemed to have commenced on the…………………and shall
continue until determined as hereinafter provided.
2. The name of the firm shall be………………………………
3. The principal place of the partnership business shall be located
at…………………………or such other place as the partners may from time to time
decide.
4. The business of the firm shall be dealing with ……………………………………and such
other business or businesses related thereto as the partners may from time to time
agree upon.
5. The capital of the partnership shall be contributed by the partners equally and all
profits and losses including loss of capital shall also be shared by the partners equally.
6. The partnership Bank Account shall be operated by both partners and cheque drawn
on the partnership Bank Account shall be signed by both of them. 15
7. The usual books of account shall be kept properly posted up and shall not be removed
by either partner from the place of business without the consent of the other partner.

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 Each partner shall have free access to them at all times and shall be at liberty to make
such extracts therefrom as he may think fit.
8. If any partner out of the two partners shall die during the continuance of the
partnership, his share in the capital assets and profits shall accrue to and vest in his
legal personal representative without any payment on his part.
9. If any partner shall desire to retire during the continuance of the partnership the other
partner shall have the first right to purchase the share of the retiring partner in the
capital assets and profit of the partnership at a price of the assets, credits, debts,
liabilities, and transaction of the partnership {but with taking goodwill into account} and
such price shall be paid by the continuing partner to the retiring partner.
10. Each partner shall be just and faithful to the other partner and in all transactions
relating the partnership business and at all times give to the other partner a true
account of all dealings.
11. Neither partner shall without the consent to the other –
a. Waive the whole or any part of any debt or sum due to the partners.
b. Except in the ordinary course of business of trade dispose of by loan, pledge or sell or
otherwise of any part of the partnership property.
c. Become a bail guarantor or surety for any person or to do or knowingly suffer anything
whereby the partnership property may be endangered.
IN WITNESS WHEREOF the parties hereto have hereunto set their hands and respectively
signed these presents the day month and year hereinafter appearing.

Name: …………………………………………….
Signature: ……………..……….….…………….
Postal Address: ……….………..…….…………

Name: ……………………………………………
Signature: …………………..…….…………….
Postal Address: ……….……….…….…………

Witness: 16

Name: ……………………………………………
Signature: …………………..…….…………….
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Postal Address: ……….……….…….…………

EXAMPLE TWO

PARTNERSHIP DEED

This partnership agreement is effectively made this Thursday, 04 th day of October 2018
BETWEEN:
FATMA HASSAN MTWENGE an adult resident of Morogoro in Morogoro Municipality, P. O.
Box 1031 Morogoro Tanzania herein referred as Partner in one hand
AND
ZAMDA YUSUF MUSOKE an adult resident of Morogoro in Morogoro Municipality, P. O. Box
1031 Morogoro Tanzania herein referred as Partner in other hand

WHEREBY IT IS AGREED AS FOLLOWS:

1. FORMATION AND PURPOSE
That the name of Partnership will be Z & F MUSLIMAH COMPANY, which is mutually formed
by the parties for carrying on the business herein referred as MUSLIMAH SALON AND
BOUTIQUE
2. PLACE OF BUSINESS;
The principal place of the partnership business will be situated at Morogoro town particularly
at the place of Muslim University of Morogoro in Morogoro Municipality within
Morogoro region.
3. COMMENCEMENT AND DURATION;
the parties to this partnership desires to begin this partnership as soon as to the conclusion
(completion of signing this deed) and for the purpose of partnership business, partners 17
desires to begin their partnership business this……………………. Day
of…………………………… 2018.

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Provided that, The Partnership will be automatically dissolved if any Partner stops being a
Partner by reason of his/her death, retirement or expulsion or dissolved by partners mutually.
4. CAPITAL OF THE PARTNERSHIP
Parties have mutually agreed to contribute their contribution to form the whole capital of the
partnership whereby
a. Initially the capital of the partnership shall be Tanzanian shillings 1,000,000/= (One
million only in which each partner contributes equally (that is shillings 500,000/= five
hundred thousand only).
b. If at any time the Partners decide to increase the capital of the Partnership, the
amounts of which they intend to increase will be contributed in such proportions as
they may agree and deem to be fit to them.
c. The mode by which the contribution will be held shall be decided by all partners.

5. PROFITS AND LOSSES

Any profit or loss for which a partnership is incurred shall be shared equally by all partners
unless otherwise the further contribution of the capital of the partnership as provided in clause
2 paragraph “b” of this deed is made with no equal share between then hence in such a case,
any profit or loss incurred thereof shall be shared by partners depends on their share in
contribution.
Provided that, if any person is a Partner for only part of a Partnership Year, his share of any
Profit or Loss for that Partnership Year will be calculated as if he had been a Partner for the
whole of that Partnership Year.
6. MANAGEMENT AND DECISIONS
The management and decisions in relation to this partnership shall be upon both partners
provided that,
a. Where a matter requires the decision of the Partners, such matter will be determined
by the Partners by simple majority vote.
b. The following matters require the unanimous consent of the Partners:
c. The admission of new Partners to the Partnership;
d. the alteration of the Partners’ shares in Profits and Losses; any change to this Deed;
the Partnership giving a guarantee in excess of the Expenditure Limit;
e. changing the Premises or opening new premises; 18
f. changing the name of the Partnership;
u. The Partnership borrowing or lending any sum in excess of the Expenditure Limit;

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 v. the acquisition or disposal of all or part of the business of the Partnership or merger
with another partnership;
w. Any purchase of items of the Partnership in which the partnership will incur cost.
x. any changes in the Bank Accounts ;
y. any change in the business of the Partnership;
z. the expulsion of any Partner;
aa. any decision to dissolve the Partnership.
bb. Meetings of the Partners may be called by any Partner but, there must be not less
than 10 days’ notice of the meeting which shall be given to all those entitled to attend,
but a meeting can be convened at shorter notice if all the Partners agreed.
cc. The quorum for a meeting of the Partners is all the Partners.

7. ACCOUNTANTS, ACCOUNTS AND RECORDS

The Partners shall ensure that accounting records are kept giving a true and fair view of the
Partnership’s business.
a. The records shall be available for inspection by each of the Partners and the
Accountants at any time.

b. As soon as practicable after the end of each Partnership Year the Partners shall
instruct the Accountants to draw up a profit and loss account in respect of that
Partnership Year and a balance sheet as at the relevant Accounts Date (Partnership
Accounts).
c. The Partnership Accounts shall be approved by the Partners and, once approved, will
become binding on each of the Partners, except in the case of manifest error.

8. BANK ACCOUNTS
The partners shall open a current account for the purpose of this deed which shall be opened
in the name of this partnership as explained in clause one above at any bank as it will be
deemed by the partners and such account shall be operated by partners jointly as declared
from time to time to the Banks.
Provided that
a. All Partnership monies not required for current expenses and all cheque must be paid
promptly into the Partnership bank account. 19
b. All cheque or instructions for the electronic transfer of money from any account of the
Partnership with the Bank will be in the Partnership’s name.

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 c. In the case of instructions for electronic transfer, any Partner will sign written
confirmation of those instructions after consultation with other Partner.

9. PARTNERSHIP PROPERTY
Partnership Property belongs to the Partners in equal proportions as like their contribution to
the capital of the Partnership.
Provided that,
a. Where the partners contribute with no equal share, the property will be belonging to
the partners in the proportions in which they are entitled to share in the capital of the
Partnership.
b. Any Partnership Property, which is vested in one, or individual Partners’ names is held
by him on trust for all of the Partners. All costs and expenses relating to such
Partnership Property will be borne by the Partnership and the other Partners shall
indemnify the Partner in whom such property is vested against all liabilities which may
arise directly or indirectly in respect of it.

10. INDEMNITY
Each Partner shall indemnify the other Partner and keep indemnified by the other Partners
from and against all payments made and liabilities incurred by each such Partner in the
performance of his duties as a Partner in the ordinary course of the business of the
Partnership or in respect of anything necessarily done by him for the preservation of the
business or Partnership Property.

11. RETIREMENT
If any partner at any time during the subsistence of the partnership, be desirous of retiring
from the partnership, it shall be competent from his to do so, provided he shall give at least
one calendar month notice of his intention of doing so. The remaining partner shall pay to the
retiring partner or his legal representatives of the deceased partner, his share in the assets of
the partnership.

12. DEATH OF PARTNER 20

In the event of the death of any partners, one of the legal representatives of the Deceased
partner shall become the partner of the firm and in the event the legal Representative show
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their denial to point the firm, they shall be paid the part of the Part of the purchase amount
calculated as on the date of the death of the partner.

13. ARBITRATION
Whenever there by any difference of opinion or any dispute between the partners The
partners shall first resolve their difference or dispute amicably but in case they fail to resolve it
amicably, they shall refer the same to an arbitration of one person.
Provided that, The decision of the arbitration so nominated shall be final and binding on all
partners, such arbitration proceedings shall be governed by laws which is in force by that
time.

14. SEVERANCE
If any court or competent authority finds that any provision of this Deed (or part of any
Provision) is invalid, illegal or unenforceable, that provision or part-provision will, to the Extent
required, be deemed to be deleted, and the validity and enforceability of the other
Provisions of this Deed will not be affected.

IN WITNESS whereof the parties hereto have set their hands on this agreement
this…………….day of October 2018.

SIGNED and DELIVERED at Morogoro

By the said FATMA HASSAN MTWENGE
Who has been introduced to me
By …………………………………………………
The latter being known to me personally
This ………. Day of October,2018

21
SIGNED and DELIVERED at Morogoro
By the said ZAMDA YUSUF MUSAKE
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Who has been introduced to me
By …………………………………………………
The latter being known to me personally
This ………. Day of October,2018

WITNESSED BY
NAME…………………………………………
SIGNATURE …………………………………
QUALIFICATION ……………………………
POSTAL ADDRESS……………………

22

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 JOINT VENTURE IN TANZANIA
What Is a Joint Venture (JV)?
A joint venture (JV) is a business arrangement in which two or more parties agree to pool
their resources for the purpose of accomplishing a specific task. This task can be a new
project or any other business activity
In other words, A Joint Venture Agreement is a legally binding contract between two or more
business entities or individuals entering into a temporary business relationship to achieve a
mutual goal.
 A joint venture agreement outlines the conditions and commitments of the participants
as well as their common objective.
 Each party to a contract shares in the risk and reward, and by putting their agreement
in writing, they can reduce disagreements.
 Since a joint venture agreement is a binding legal contract, either party may file a
lawsuit against the other if the other party fails to abide by its terms.
 A joint venture agreement is governed by the contract law of a specific jurisdiction.
 Other laws may have an impact on the venture depending on the parties involved and
the nature of the business.
 It’s formed for definite purpose and specific time
 In this two or more company may come into a contractual agreement to form a joint
venture and perform a certain economic activities or specific project together
 They share risk in proportional of their contribution

Examples of Joint Venture

A good real-world example of a Joint venture is the joint venture between BMW and Brilliance
Auto Group.
BMW formed a joint venture with the Chinese Automobile manufacturer Brilliance Auto Group
in 2003 to produce and sell BMW cars in China. The name of the Joint venture was BMW
Brilliance
In that Joint venture, the ventures jointly agreed to invest €450 million in the Joint venture, in
terms that BMW took a 50% stake in the Venture company while Brilliance Auto took a 40.5%
stake.
23
The remaining 9.5% went to the Shenyang municipal government.

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Other examples of joint ventures include;
Private persons – For example, independent contractors can combine resources through a
joint venture to get a major contract to build a housing development.
Corporations – For example, General Motors and Volvo Trucks formed a joint venture to build
heavy-duty trucks. This is a joint venture instead of a partnership because the two companies
conduct business separately except for this related series of transactions (manufacturing
trucks).
Features of joint venture
a. Joint control off business
b. Two or more company put their capital together
c. They share profit or loss
d. They will be able to access technology, market, decrease cost of operation
What to do in order to be a successful joint venture
a. Choose a partner careful
b. How you structure on your deal
c. Agreement on control of joint venture
d. Manage people , your required to manage well you are employees
e. Consider experience of your fellow partner
Ways of forming Joint venture in Tanzania
a. Prepare a joint venture agreement.
b. Incorporate a separate Company purpose for joint venture
c. Appointment of board members. Each shareholders will have to appoint equal number
of board member
Role of the lawyers in Joint venture
a. Provide legal opinion/ advises
b. Sign and draw joint venture agreement and other contract
Advantages of joint venture
One of the most important joint venture advantages is that it can help your business grow
faster, increase productivity and generate greater profits. Other benefits of joint ventures
include:
24
a. Access to new markets and distribution networks
b. Increased capacity
c. Sharing of risks and costs (i.e liability) with a partner
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 d. Access to new knowledge and expertise, including specialized staff
e. Access to greater resources, for example, technology and finance
f. Shared investment
g. Shared expenses

Disadvantages of joint venture

Joint ventures can pose significant risks relating to liabilities and the potential for conflicts and
disputes between partners. Problems are likely to arise if:
 dispute so objectives of the venture are unclear
 The communication between partners is not great
 The partners expect different things from the joint venture
 The level of expertise and investment isn’t equally matched
 The work and resources aren’t distributed equally
 The different cultures and management styles pose barriers to co-operation
 The leadership and support is not there in the early stages

JOINT VENTURE AGREEMENT

Contents of Joint venture Agreement
To write a valid joint venture agreement make sure your agreement contains;
a. Parties-ventures
b. Name of the joint venture
c. Duration of the joint venture
d. Nature of the business
e. Capital contribution clause
f. Rights, and duties of ventures
g. Termination clause
h. Dispute resolution clause
i. Governing law clause
j. Confidentiality clause
k. Clause for control, influence, and power over the project or transaction.
l. Insurance clause
25

EXAMPLE OF JOINT VENTURE AGREEMENT

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 JOINT VENTURE AGREEMENT
THIS JOINT VENTURE is made on this………………day of……………….20…
BETWEEN
(1)_________________ of ____________________ (the “First Joint Venture”); and
AND
(2)_________________ of ____________________ (the “Second Joint Venture”) hereinafter
collectively

WHEREAS the parties to this Agreement have agreed to carry on the business
of………………….in a joint venture under the name and style of………………..

AND WHEREAS the parties have agreed to execute this Joint Venture Agreement and to
commence and carry on business in a joint venture on the following terms and conditions.

NOW THEREFORE THIS AGREEMENT WITNESSETH AS FOLLOWS.

1.Name
The name of the joint venture shall be……………….
2.Duration
The Joint Venture shall exist for a period of ……………years and shall commence
from……….. The parties may renew the common venture by executing another Joint Venture
Agreement. A party unwilling to renew the venture upon the lapse of the initial…………….
Years shall give a ………….. month advance notice of that intention, prior to the expiration of
the Agreement period.
3.Business
The main business of the Joint Venture shall be ………………and other allied businesses.
Both parties will be working ventures and thus actively engaged in the day-to-day operations 26
of the business.
4.Capital

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The parties have contributed towards the initial capital a sum of ………………..and
………………for the first and second party respectively.
The net profits and losses of the Venture will be shared by the parties in the proportion to the
capital contribution. Net profits will mean the gross profits earned in such a year less the
expenses of the business as recognized by accounting principles.
5.Ownership of Venture assets
All the tangible and intangible assets of the Venture including the goodwill, benefit of business
licenses and permits, and benefits of contracts entered, shall belong to the parties in the
proportion of capital contributed by each party.
6.Accounts
The parties shall open two accounts. One accounts for operational requirements and the
other for savings purposes. The operational account may be accessed by any of the two
parties. The account for savings shall only be operated and accessed upon the written
authorization of both parties
7.Profits
Parties are entitled to a periodical distribution of…………….percent of the net profit. The
interval of the distribution/ payment is to be determined from time to time by the Parties.
8.Object
This Agreement is not intended to create a Partnership and a party to the Agreement shall not
have the authority to bind the other party in transactions with third parties unless the express
consent of the other party has been secured.
9.Death of venturer
On the death of any party and there is no legal representative willing or capable to take the
place of the deceased party, the share of the deceased party may be purchased by the
remaining party at a valuation to be made by an arbitrator.
10.Termination
A party desirous of prematurely terminating the joint venture shall give a………….month
written notice of that intention to the other party. Unreasonable termination of the venture
shall entitle the innocent party to fair compensation to offset the commercial inconvenience
and loss resulting from the termination. 27

The premature termination of the Venture, unless resulting from the death of one of the
parties shall be witnessed by a written resolution to that effect.
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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11. Governing Law
This joint venture shall be governed by the laws of …………..

IN WITNESS OF WHICH the parties have signed this agreement the day and year first above
written
______________________________
Signed by or on behalf of the First Joint venture
___________________________
Signed by or on behalf of the Second Joint venture

In presence of (first witness)

Name ____________________________
Address___________________________
Occupation_________________________

In presence of (Second witness)

Name ____________________________
Address___________________________
Occupation_________________________
SECOND EXAMPLE
JOINT VENTURE

THIS JOINT VENTURE AGREEMENT IS MADE the______ day of ________ 20______

BETWEEN
(1)_________________ of ____________________ (the “First Joint Venture”)
28
AND

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(2)_________________ of ____________________ (the “Second Joint Venture”)
hereinafter called the “Joint Ventures”.

In consideration of the terms, conditions and covenants hereinafter set forth, the
parties agree as follows:
1. The Joint Ventures hereby form a joint venture (the “Joint Venture”) for the purposes of
___________________________________ and shall conduct business under the name
__________________ at _________________.
2. The term of the Joint Venture shall be ________________________________ .

3. The capital of the Joint Venture shall consist of Tshs. ______________. The First Joint
Venture shall contribute Tshs.________________ and the Second Joint Venture shall
contribute Tshs. _________, which shall be deposited in
________________________(Bank) and shall be disbursed only upon the signature of
all the Joint Ventures.
4. The profits and losses of the Joint Venture shall be determined in accordance with good
accounting practices and shall be shared among the Joint Venture in proportion to their
respective capital contributions.
5. ____________________________ shall have the sole discretion, management and
entire control of the conduct of the business of the Joint Venture as the “Venture
Manager.”
6. As compensation for his services the Venture Manager shall be paid Tshs.________ per
__________ during the duration of the Joint Venture and shall be reimbursed for all
reasonable expenses incurred in the performance of his duties as Venture Manager.
7. Each Joint Venture shall be bound by any action taken by the Venture Manager in good
faith under this agreement. In no event shall any Joint Venture be called upon to pay any
amount beyond the liability arising against him on account of his capital contribution.
8. The Venture Manager shall not be liable for any error in judgment or any mistake of law
or fact or any act done in good faith in the exercise of the power and authority as Venture
Manager, but shall be liable for gross negligence or willful default.
9. The relationship between the Joint Ventures shall be limited to the performance of the
terms and conditions of this agreement. Nothing herein shall be construed to create a
general partnership between the Joint Venture, or to authorize any Venture to act as a
general agent for another, or to permit any Joint Venture to bind the other except as set 29
forth in this agreement, or to borrow money on behalf of another Joint Venture, or to use
the credit of any Joint Venture for any purpose.

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10. Neither this agreement nor any interest in the Joint Venture may be assigned without the
prior written consent of the Joint Venture hereto.
11. This agreement shall be governed by and interpreted under the laws of Tanzania. Any
claim arising out of or relating to this agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Arbitration Ordinance and judgment upon the award
rendered by the Arbitrators(s) may be entered in court having jurisdiction thereof.
12. Any and all notices to be given pursuant to or under this agreement shall be sent to the
party to whom the notice is addressed at the Joint Venture maintained by Joint Venture.
13. This agreement constitutes the entire agreement between the Joint Venture pertaining to
the subject matter contained in it, and supersedes all prior and contemporaneous
agreement, representations, warranties and understandings of the parties. No
supplement, variation or amendment of this agreement shall be binding unless executed
in writing by all the parties hereto. No waiver of any of the provisions of this agreement
shall be deemed, or shall constitute a continuing waiver. No waiver shall be binding
unless in writing signed by the party making the waiver.

IN WITNESS OF WHICH the parties have signed this agreement the day and year first above
written
___________________________
Signed by or on behalf of the First Joint venture
_________________________________
Signed by or on behalf of the Second Joint venture

In presence of (first witness)

Name ____________________________
Address___________________________
Occupation_________________________

In presence of (Second witness)

Name ____________________________ 30

Address___________________________
Occupation_________________________
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EXAMPLE 3

JOINT VENTURE AGREEMENT

THIS JOINT VENTURE AGREEMENT IS MADE on the____day of _____

BETWEEN

(1)_________________ of ____________________ (the “First Joint Venture”);

AND
(2)_________________ of ____________________ (the “Second Joint Venture”) hereinafter
collectively called the “Joint Ventures”.
In consideration of the terms, conditions, and covenants hereinafter set forth, the parties
agree as follows:
1. The Joint Ventures hereby form a joint venture (the “Joint Venture”) for the purposes of
the land development project and shall conduct business under the name ‘Landscape
developers‘ at _________________
2. The term of the Joint Venture shall be 10 calendar years from the date of executing
this Agreement
3. The capital of the Joint Venture shall consist of USD $10 Billion.
4. The First Joint Venture shall contribute $ 7 billion and the Second Joint Venture shall
contribute $ 3 Billion, which shall be deposited in _____________________ Bank plc
and shall be disbursed only upon the signature of all the Joint Ventures.
5. The profits and losses of the Joint Venture shall be determined in accordance with
good accounting practices and shall be shared among the Joint ventures in proportion
to their respective capital contributions.
6. First Joint venture shall have the sole discretion, management, and entire control of
the conduct of the business of the Joint Venture as the “Venture Manager.”
7. As compensation for his services the Venture Manager shall be paid $1,000 per
Month during the duration of the Joint Venture and shall be reimbursed for all
reasonable expenses incurred in the performance of his duties as Venture Manager.
8. Each Joint Venture shall be bound by any action taken by the Venture Manager in 31
good faith under this agreement. In no event shall any Joint Venture be called upon to
pay any amount beyond the liability arising against him on account of his capital
ccontribution
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
PREPARED BY HAMIDU M. MUSSA
 9. The Venture Manager shall not be liable for any error in judgment or any mistake of
law or fact or any act done in good faith in the exercise of the power and authority as
Venture Manager, but shall be liable for gross negligence or willful default.
10. The relationship between the Joint Ventures shall be limited to the performance of the
terms and conditions of this agreement. Nothing herein shall be construed to create a
general partnership between the Joint Venture or to authorize any Venture to act as a
general agent for another, or to permit any Joint Venture to bind the other except as
set forth in this agreement, or to borrow money on behalf of another Joint Venture, or
to use the credit of any Joint Venture for any purpose.
11. Neither this Agreement nor any interest in the Joint Venture may be assigned without
the prior written consent of the Joint Venture hereto.
12. This agreement shall be governed by and interpreted under the laws of …….. Any
claim arising out of or relating to this agreement, or the breach thereof, shall be settled
by arbitration in accordance with …………………. Act and judgment upon the award
rendered by the Arbitrators(s) may be entered in a court having jurisdiction thereof.
13. Any and all notices to be given pursuant to or under this agreement shall be sent to
the party to whom the notice is addressed at the Joint Venture maintained by Joint
Venture.
14. This agreement constitutes the entire agreement between the Joint Venture pertaining
to the subject matter contained in it, and supersedes all prior and contemporaneous
agreements, representations, warranties, and understandings of the parties. No
supplement, variation, or amendment of this agreement shall be binding unless
executed in writing by all the parties hereto. No waiver of any of the provisions of this
agreement shall be deemed or shall constitute a continuing waiver. No waiver shall be
binding unless in writing signed by the party making the waiver.
IN WITNESS OF WHICH the parties have signed this agreement the day and year first above
written
___________________________
Signed by or on behalf of the First Joint venture
………………………………………..
Signed by or on behalf of the Second Joint venture

In presence of (first witness) 32

Name ____________________________
Address___________________________
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Occupation_________________________

In presence of (Second witness)

Name ____________________________
Address___________________________
Occupation_________________________

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 COMPANY
A company is a group of persons associated together for the attainment of common end,
social or economic or a voluntary association of persons or individual formed fro some
common purpose. (Smith V Anderson 1880 Ch. D.247)
Section 2 of the Company Act, define a company’’ means a company formed and registered
under this Act or an existing company;
TYPES OF COMPANIES
Section 3 of the company Act provide for types of companies
 On the basis of ownership
 On the basis of liability
 On the basis of control
 On the basis of establishment
 Foreign Company

A.On the Basis of Ownership

i. Private Company
 Section 27(1) of the company Act provide for Private company
 Prohibited from allotment of shares in public
 Restricts the right to transfer it’s shares
 Does not need a certificate of commencement of business
 There must be minimum of two members. Section 3 of Company Act
ii. Public company
 According to Section 3(3) of Company Act, a public company is limited by shares or
limited by guarantee and having a share capital
 The general public is allowed to subscribe for memberships
 There must be a minimum of two members. Section 3
 It cannot commence business unless it complies with the provision of section 114 of
the Co. Act
 Free transfer of shares. Section 45 of Co. Act
B.On the basis of Liability
i. Company Limited by Shares
34
 According to Section 3 (2)(a) of the company Act, these are companies having the
liability of its members limited by the memorandum to the amount, if any unpaid on
the shares respectively held by them.
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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 ii.Company limited by guarantee
 A company limited by guarantee is a registered company having the liability of its
members limited by its MEMART to such amount as members may thereby
undertake to pay if necessary on liquidation of the company. Section 3 (2)(b)
 This in most cases are those companies which are formed for non profit purpose.
iii.Unlimited Company
 According to Section 3 (2)(c), these are companies that do not have any limit on
the liability of its members this means that there is no limit on the liability of its
members to contribute to the assets of the company on winding up.
 An unlimited company must be a private Company
C. On the basis of Control
i. Holding Company
 When a company has control over another company it’s know as holding Company
 Section 456 of the company Act, allows a statutory company to be the sole
member of a holding Company
ii. Subsidiary Company
 Is a company controlled by another company
 Condition for a company to be a subsidiary of another; is that other company
control the composition of its board of directors also that the other company holds
more than half in face value of its share capital.
D. On the basis of establishment
i. Statutory Company
 These are companies created by special Act of the legislature
 Those companies are owned by the government and are the main objective of
these companies are to provide some necessary service for the benefit of the
entire country
ii. Registered Companies
 These are companies formed and registered under the Company Act
 They come into operation only when they are registered under the Act, and the
certificate of incorporation have been issued by the registrar 35

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iii. Foreign Company
 This means companies incorporated in countries outside Tanzania under the law of
that country and established the place of business in Tanzania. Section 433 of
Company Act

INCORPORATION OF A COMPANY
Incorporation is the term used to describe the formation and registration of a limited
company. When this process is complete, a certificate of incorporation will be issued. The
legal status of a limited company is that it is a separate entity from the owners of that
business.
A company comes into existence is generally by a process referred to as incorporation. Once
a company has been legally incorporated, it becomes a distinct entity from those who invest
their capital and labor to run the company.
Usually the first step to form a company is the process known as ‘promotion’ where a
person persuades others to contribute capital to a proposed company before it is
incorporated. Such a person is called the promoter of the company. Promoters also can enter
into a contract on behalf of a company before or after it has been granted a certificate of
incorporation, and arrange share issues in the name of the company.
The doctrine of Incorporation
The doctrine of Incorporation state that “Once a company is incorporated become a legal
person independent from its members “
 The doctrine was established in the case of Solomon V Solomon [1897] AC 22
where the court held that, the company and Solomon are two different persons. Each
of them could have liabilities of one’s own and none of them is responsible for
another’s liabilities.

FEATURES/ CHARACTERISTICS OF A COMPANY/ EFFECTS OF THE DOCTRINE OF

INCORPORATION
a. Separate legal existence from its members.
 On incorporation under the law, a company becomes a separate legal entity as
compared to its members.
 The company is different and distinct from its members in law. 36
 It has its own name and it is own seal, it’s assets and liabilities are separate and
distinct from those of its members

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  It’s capable of owning property, incurring debts and borrowing money, having bank
account, employing people, entering into contracts and suing and being sued
separately.
 The legal personality of separate entity was recognized in the case of Oakes v
Turquant (1867) L.R 2 H.L. 325 also in Solomon V Solomon (1897) A. C 22 where
the House of Lords held that, as the company was duly Incorporated, it is an
independent person and liabilities appropriate to itself.

b. Limited liability
 The company being separate person means is the owner of its assets and bound by
its liability, members are neither the owners of company’s undertaking nor liable for its
debts.
 The liability of members of the company is limited to contribution to the assets of the
company up to the face value of shares held by them.
 A member is liable to pay only the uncalled money due on shares held by him when
called upon to pay and nothing more, even if liabilities of the company far exceed it is
assets.
 The personal property of shareholders cannot be attached for the debts of the
company if he or she holds fully paid up shares
 A company may be limited by shares or by guarantee ( Section 3(2) of the company
Act

c.Separate Property
 A company is a distinct legal entity
 The company property is it’s own
 A member cannot claim to be the owner of the company’s property during the
existence of company
 A shareholder does not have insurable interest in the property of the company.
Macaura V Northern Insurance company (1925) AC 619 Whereby in this case
Macaura was holder of nearby all shares of a timber company. He was a substantial
creditors of the company. He was insured the company’s timber in his own name, the
timber was later destroyed by fire. Due to this he claim for indemnification by the
insurance company.
It was held that the insurance company was not liable. The legal position is that
Macaura has no insurable interest on the company. Macaura could insure his stake i.e
percentage of shares he own and the company could have insured the whole timber 37

d. Perpetual succession
 A company is a juristic person with perpetual succession
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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  A company does not die or cease to exist unless it is specifically would up or the task
for which it was formed has been completed.
 Members of the company may keep on changing from time to time but that does not
affect life of the company
 Death or insolvency of members of a company does not affect the existence of the
company.
 It’s created by the process of law and can only be put to an end by the process of law

e. Transferable shares
 Section 74 of the company Act state that “ the shares or any other interest of any
member in a company shall be transferred in a manner provided by article of the
company”
 Shares in public company are freely transferable. While in private company no transfer
of shares
 The restriction on transfer of share to family members or close related person

f. Capacity to sue or be sued

 A company can sue or be sued in it’s own name as distinct from its members

g. Separate management (Section 15(2) of Co. Act)

 A company is administered and managed by its managerial personnel i.e The
Board of Directors
 The shareholders are simply the owners of shares in the company and need not be
necessarily the managers of the company.

THE VEIL OF INCORPORATION

 A corporate veil is a legal concept that separates the acts done by the companies and
organizations from the actions of the shareholders. It protects the shareholders from
being liable for the actions done by the company.
 This is not an absolute right the court depending on the facts of the case can take the
decision whether the shareholder is liable or not.
 The Veil of Incorporation, separate legal personality of company as a shield.
 It act as a screen or shield separating the company from its individual shareholders
and directors 38

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LIFTING OF VEIL OF INCORPORATION
At times it may happen that the corporate personality of the company is used to commit
frauds and improper or illegal acts. Since an artificial person is not capable of doing anything
illegal or fraudulent, the veil of corporate personality might have to be removed to identify the
persons who are really guilty. This is known as ‘lifting of corporate veil’.
Lifting of corporate Veil, refers to the situation where a shareholder is held liable for its
corporation’s debts despite the rule of limited liability and/of separate personality. The veil
doctrine is invoked when shareholders blur the distinction between the corporation and the
shareholders. A company or corporation can only act through human agents that compose it.
 As a result, there are two main ways through which a company becomes liable in
company or corporate law: firstly through direct liability (for direct infringement) and
secondly through secondary liability (for acts of its human agents acting in the course
of their employment).
Categories of Lift the Corporate Veil
The Corporate Veil can be lifted either by:-
 Lifting veil by Court
 Lifting Veil by Statute
 Lifting the Veil under Environmental Management
A. Lifting by Court
 This is when the courts in compelling situations ignored all the conceptions of
corporate personality and hold the directors and shareholders personally liable.
The following are grounds established
a. Where a fraud is suspected, the corporate entity may also be disregarded where the
veil is used for some fraudulent purpose or defeating the claim of the creditors.
b. When the company tries to avoid Legal obligation, when the corporate personality
is used to avoid Legal obligation, the court can disregard the legal personality and can
identify with it’s members. In other words, the court can hold shareholders with
unlimited liability. In Yusuphu Manji V Edward Masanja & Abdallah Juma, Civil
Appeal No. 78 of 2002.
c. If it is used to avoid tax obligations the court also empowered to veil the corporate
shield if it is used for avoiding tax obligations. Where the purpose of forming a company
39
is tax evasion the court may veil the incorporation of the company so as to protect the
interest of revenue

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 d. Where the character of the company is to be determined. In case doubt arises that
a company is owned or controlled by enemies of another country, the court at their
discretion ignore the corporate fiction and examine the person who exercise de facto
(real) control over the affairs of the company.
e. Where the company act as an Agent, a company may sometimes act as agent or
trustee of its members or of another company. In those circumstance, such company is
deemed to have lost its individuality and shall be identified with it’s member
f. Where the public policy is to be protected. The court may lift the corporate shield so
as to protect the public policy and prevent transactions, which are contrary to public
policy.
B. Lifting Veil by Statute
The corporate veil may be lifted where the statute itself contemplates lifting the veil.
The following are grounds established:-
a. Reduction in membership, less than Seven in public company and less than two if it
is in private company. (Section 26 of Company Act)
b. Misrepresentation in the prospectus (Derry V Peek) in case of misrepresentation,
the Promoters, directors and every person responsible in this matter can be held liable.
c. Mis – description of companies name, while signing a contract if the company name
is not properly described then the corporate veil can be lifted.
d. Fraudulent conduct, in case the company is carried on with an intent to defraud the
creditors, then the court may lift the corporate veil. (Section 383 (1) of Co. Act)
e. The liability for failure to furnish the information, (Section 216(1)(2)of the Co. Act)
which provides that “it shall be the duty of all persons who are or have been officers of
the company to produce such a book or such information or explanation so far as lies
within their power.
(2) If any such person refuses or neglects to produce such books or furnish any such
information or explanation he shall be liable to a fine in respect of such offence.

40

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 PROMOTION AND FORMATION OF A COMPANY
Promotion means the entire process by which a company is brought into existence
A person who conceives the company and invests the initial capital is known as a Promoter.
 A Promoter will enter into Preliminary contract with the venders
 Make arrangements for the preparation of advertisement.
Duties of Promoter
 He must not make a secret profit must make a full disclosure of any profit made
 He must always act on the interest of the company and not on his own interests
 He must avoid undue influence or fraudulent acts.
 He must not give benefits of any negotiations or contracts into which he enter in
respect of the company. Example; He cannot sell the property to the company at a
higher price than he gave for it.
Remedies available against Promoter on the breach of the duty
 The company may rescind the contract and recover the purchase price
 Promoter shall be accountable to the company for the profit he has made
 The company may retain the property and pay no more
 The company can sue the promoter for Breach of trust
Rewards to the Promoter
 Payment of some remuneration
 May be given commission on shares sold
 The MEMART may provide for fixed sum to be paid to him

PRE INCORPORATION CONTRACTS

These refer to the contract which were entered into by the Promoter before the company
come into existence.
 The contracts entered between the third parties and the Promoter before incorporation
are binding personal to the Promoters as per Section 40 of the company Act.
Solution to personal liability to the Promoters
 Novation, promoter liability ends when the company once formed enters into new 41
contract on the same terms. Section 40 where the third parties will agree that the
Promoters should not be held liable.

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  The MEMART of the company can be formed or drafted to include provisions binding
binding the directors to adopt the contract.

FORMATION OF COMPANY
Nowadays all procedures for registration of Company are done through Online Registration
system (ORS)
Registration Procedures through Online Registration system
Once you have the online registration system you are free to access BRELA
Documents required
Before you register the Company online you need to have the following information
1. The national Identification Number (NIDA)
 This is required for all Registration process.
 All users who have the NIDA can access the BRELA for Registration
 This means that all the Company directors and Secretaries of the company will have
to provide their NIDA so as to be filled in the ORS
 You cannot register a company if you do not have a NIDA
For foreign company they must have a Passport issued by their respective countries
2. Taxpayer Identification Number (TIN) for all directors
 You must have TIN issued by the TRA
3. Prepare and duly signed Memorandum of Association and Article of Association
 A copy of a memorandum and articles of the company stipulating the objects and
operation of the company.
 The memorandum of association must be in line with objectives of the ORS
4. A list containing particulars of the directors, shareholders, and secretary of the
company as to residential addresses, personal details
 The directors of companies , company secretary and shareholders must provide
their physical address i.e they must give details which will help to reallocate them
 They must give their email address, phone number, region
5. Detail about the Registered office of the company
 They must provide details which show where their companies is located i.e street ,
Plot No, email address 42
6. Proposed Company’s name. (Section 30 of the company Act)
7. A list of the activities to be carried on by the company
8. Copies of Passports if there are foreign directors, shareholders, or secretaries.
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
PREPARED BY HAMIDU M. MUSSA
After having all the above details it will help you to have the online registration system

STEPS TO BE FOLLOWED IN REGISTRATION OF A COMPANY

1. Filling in all prospective company particulars in the online registration system
 It’s called prospective company because it is not in existence as the company is
coming into being
 The ORS will need the user to fill in all particulars regarding the company like
general perspective, company shareholders, company directors
2. Uploading the scanned documents into the ORS, basically after you are through with
the first step the system will generate the print out documents which you have filled in
the first step once you got the documents you must cause the information to be signed
by all directors and you must scan it in PDF form and together with the Memorandum
of association and Article together with a signed and stamped.
 If everything is okay the system will develop the control number for payment after each
and everything is okay
 Once you get the control number you have to effect payment
 The payment can be effected through Bank Account
3. Downloading and printout Certificate of Incorporation
 This is the last step of incorporating companies in Tanzania. It mean the registrar have
approved each and everything.
Foreign company
Foreign company are company incorporated outside Tanzania, under the law of that country
and has established the place of business in Tanzania ( Section 433 of Co. Act)
How to register a foreign Company in Tanzania?
A company that has been incorporated outside of Tanzania may establish a branch office in
Tanzania by obtaining a Certificate of Compliance from BRELA (s. 433(1) of the Companies
Act. A company is treated as a foreign company when it is incorporated by the laws of the
foreign countries or its management, the majority number of the shareholders are foreigners
and where management control is exercised outside Tanzania. Registration is done by
submitting the application online.
Documents required
 A certified copy of the charter, statutes or memorandum and articles of the company or 43
other instrument constituting or defining the constitution of the company from the
country where the company was formed

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  A list containing particulars of the directors and secretary of the company as to
residential addresses, personal details
 Tax Payer’s Identification Number (TIN) for one of the director’s Identification
 A statement of subsisting charges created by the company related to property located
in Tanzania
 Name(s) and address (es) of one or more person(s) resident in Tanzania authorized to
act as the company’s D
 Full address of the registered principal place of business and place of business in
Tanzania
 A copy of the most recent audited accounts
 Copies of Passports if there are foreign directors, shareholders, or secretaries.
The post Registration Procedures
 You must get taxpayer Identification Number
 You must make sure that you get the tax clearance Certificate. This show that your
company is the new one it does not have any tax burden
 Get a business license. Apply the business license from the responsible authorities
like district, municipal, or minister of industries and trade
 The VAT Registration Number. The VAT is required for company with annual turnover
100 million. However for professional company such requirements is not allowed
 Immigration, if you have a foreign company. If the director are foreigner and they
intend to work personal they are required by law to have a residential and work permit
for their safe stay and work in Tanzania
 File annual return, it is the statutory duty for every company registered in Tanzania to
file annual return. Annual return is filled electronically by filling form Now. 128 of the
company form.
 Keeping of book account, it is the requirement of the law that the company should
keep book of account either in English or Swahili which are sufficient to show the
company transaction

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 CONVERSATION OF PUBLIC INTO PRIVATE COMPANY IN TANZANIA
Private Company can be converted into Public Company in two ways;-

A) Conversion by Default

Where a private company makes a default in complying with the the following statutory
requirements laid down in

THE COMPANIES ACT, 2002 No.12

Section 27.-(I);-

1. If its membership exceeds fifty,

2. It permits free transfer of shares, or
3. Invites public to subscribe to its shares or debentures, It becomes a public company
automatically.

B) Conversion by Choice:

A private company may deliberately choose to become a public company. Section 8 of the
company Act, provide that a company on it is own choice may choose to become a public or
private company

Procedures for convention of Private Company into public company

 When a private company chooses to become a public company it will have to comply
with all the provisions of the Companies Act applicable to a public company. Within 14
days of its becoming a public company, it shall file with the Registrar a prospectus or a
statement in lieu of prospectus and a printed or typewritten copy of the special
resolution, If the Registrar get satisfied will issue a certificate that the Company has
been subjected to the provisions which are applicable to the Public Company.
45
 Special Resolution which authorize the convention from Public company to Private
company, in so doing the Memorandum and article of incorporation will be required to
be altered include to change its name to lead “Public Limited Company “ PLC .
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  That Resolution must also alter the article of association so as to contain matters
under section 27 and section 74 of the company Act which provide that shares are
movable property
 The amended Memorandum and Article of Association together with form No. 29 must
be filed to the Registrar. Form No 29 is named “ Notification of ceasing to be private
company “
Questions
Is it possible to convert a Company limited by guarantee into a company limited by shares?
The answer is It’s not possible, the company Act is silent on convention from company
limited by guarantee into a company limited by shares. The only option available is to
form a new company and choose either to be the company limited by shares or guarantee.

CORPORATE CONSTITUTION
MEMORANDUM AND ARTICLE OF ASSOCIATION OF A COMPANY “MEMART”
A.MEMORANDUM OF ASSOCIATION (MOA)
The Memorandum of association, is a legal document prepared in the formation and
registration of a limited liability company to define it’s relationship with shareholders.
 It is the charter of the company and defines the reason for it is existence.
 It regulate the external affairs of the company in relation to the outside.
 It also signify the readiness of the members to be formed into the named association
“company”
Rationale for the memorandum of association
 It provide the basis of Incorporation
 It determine the area of Incorporation of the company
 It define the relationship of the company with outsiders
 It’s unaltered charter of the company although it can be altered under some special
circumstance
 It defines the areas beyond which the action of the company cannot go 46

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The shareholders of the company shall know the field or purpose for which their money is
going to be used by the company and what risk they are undertaking in making Investment by
reading the memorandum of association.
Preparation of Memorandum of association
 The Promoters must prepare the MOA of a company in accordance with the
requirement of the law which relates to the formats and contents of the memorandum
of association
 Section 4 (1) of the Co. Act state that, the memorandum of every company shall be
printed in English or Swahili language.
 Section 5 of the Co. Act state that, the MOA shall be dated and signed by each
subscriber in the presence of at least one attesting witness.

CONTENTS OF MEMORANDUM OF ASSOCIATION

a. Name clause (Section 30)
 Each company being a legal person must have a name to establish it’s
establishment. Section 30
 The name of Public company must end with the word “PLC” and the private
company must end with “Limited “if the company is limited by shares or guarantee.
Section 4(1)(a) of the company Act
 It’s an offence to use the word limited if you not incorporated. Section 34(1) of the
Co. Act
Change name of the company
 A Company can change its name by passing a special Resolution in a general
meeting and then Inform the Registrar who can approve the changes in order for the
alteration to be effective and the approval must be in writing. Section 31(1)
 Sometimes the minister of trade may direct the company to change its name
 Once the minister gives direction such direction need to be complied within 6 weeks.
Section 33(3)
 As a matter of law and practice no company is allowed to have similar name with
another company, that is to say no company will be registered if already there exist a
company so named. Society of motor manufacturers traders Ltd V Motor
manufacturer and traders mutual insurance company Ltd (1925)
 The name of the company should not mislead the public 47
b. Registered Office Clause (Section 110)
 The company law requires that all company must have registered Office, the
purpose is to avoid briefcase company.
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  The Registered office of a company act as home of the company
 This provide full address and a physical residential home where the headquarters
of the company shall be situated.
 The office of the company is registered under form 14 a
Change of Registered office
 A company can change its registered office from one place to another within the
same city, town or village
 In order to change the registered Office Special Resolution to that effect must be
passed
 The registered office of the company is changed at any time by filling the
prescribed form No. 111; for the Notice of change in situation or address of the
registered Office and a notice of any such change must be given to the registrar
within 14 days after the date of change. Section 111
c. Objective clause (Section 7)
 This define the scope or objective of the company. It tell the aim of the company
 A company is not legally entitled to do any business other than that specified in
it’s clause
 The objective clause must not include anything which is; Illegal or opposed to the
public interest, against the law of the court, contradictory to the company Act
itself. Section 4(1)(b)
Alteration of objective clause
 The company also can alter the objective clause, this is after passing the special
Resolution and inform the registrar on such alteration. Section 8
d. Liability clause (Section 3 & 27)
 Is the clause which state the nature of liability of members of the company.
 As per Section 4(2) of Co. Act provide that, any company whose members liability
is limited by shares or guarantee the Memorandum of association must so state
that the liability of members is so limited.
 In case of a company limited by guarantee, the liability clause must state the
extent of liability of each individual member in the event of its wound up. Section
10(2)
 In case of a company limited by shares, liability of its members is limited to unpaid
shares
 In case of unlimited company, the liability clause does not appear in the 48
memorandum of association. Section 10(1)

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 e. Capital Clause (Section 5 & 64)
 The capital Clause state the amount of capital of the proposed Company with
which it is registered.
 Normally the capital is divided into shares of fixed amount
 The amount of capital as stated in the memorandum is known as the authorized
capital of the company
Alteration of capital Clause
 The power of the company to alter it’s share capital is provided under section 64
of the company Act
 Such power may only be exercised by the company in general meeting and that
must be authorized by the article of association

f. Subscription clause
 Is the clause which state the purpose of the subscribers to the incorporation of the
company, agreeing to take the shares in the company based on number written in
memorandum.
g. Association clause
 In this clause the subscribers declare that, they desire to be formed into a company and
agree to take the shares stated by their name.
Alteration of the Memorandum of association
After it has been made the memorandum of association can not altered unless by the
procedure stated by the Company Act, which is only by Special Resolution of the company.
Section 8 of the company Act

49

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B. ARTICLE OF ASSOCIATION
Article of Association, these are rules and regulations of a company formed for the purpose of
internal management
 Is the constitution of the company which regulate the internal affairs of the company
 The document contains rules, by – laws and regulations for general administration of
company
 The article regulate the manner in which the company affairs can be regulated
 Article of Association usually outline the duties, right and power governing the company
 Companies which must have articles of association are; Company limited by shares,
guarantee and unlimited company
 Section 2(2) of the company Act define the Article of Association
Contents of Article of Association
 Share capital
 Right of the shareholders
 Variation of rights
 Share Certificate
 Payment of commission
 Calls on shares
 Lien of shares
 Transfer of shares
 Forfeiture of shares
 Convention of shares into stock
 Alteration of capital
 General meetings and commission
 Voting right or proxy
 Directors
 Payment of dividends
 Audit
 Account
 Winding up

Alteration of article of Association

 Every company has clear power to alter it’s article of Association by Special 50
Resolution. Section 13 (1)

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Effect of Registration of Memorandum and Article of Association (Section 18 of the
company Act)
 The article when registered are a contract which binds the company and the company
and the members are as if signed and sealed by each members.
 It constitute through the Memorandum and article of Association of the company,
 Each member is bound as if he actually signed the memorandum and Article of
Association

SHARE AND CAPITAL STRUCTURE OF A COMPANY

Share, is the interest of shareholders in the company
 Section 20 of the company Act, define a share to mean “an interest which a member
has in a company.
 It is an interest which is measured in term of money representing the benefit and
obligation of members in the company
 By having this interest being a member of a company you are entitled to certain rights
in the company. One of the benefit is to attend in the meeting of the company and
vote, you are also entitled to receive dividend, petition for winding up of the company
and other benefits provided in the company Act and article
 On other hand, this interest is also measured in term of liability of members and
obligation depends on nature of the company whether limited by shares or guarantee
 In a company limited by guarantee, there interest as the member agreed that in the
event of wound up of the company they have to contribute a certain amount but in a
company limited by shares, the liability of members is limited to numbers of shares
remain unpaid.
 A share is not a sum of money, but is an interest measured by sun of money and is
made up by various right in the contract/ article of Association
 The interest is what is owned and give the shareholders right as defined in the article
How can a person become a shareholder of a company
There are three way in which a person may become shareholders
a. By being a subscriber to the Memorandum of association
51
b. By acquiring shares after the memorandum has been registered. A person may
acquire shares after the formation of company. A person who take these shares
become a shareholder.
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 c. By acquiring shares from another holder through transfer of shares.
How shares are issued
 The public company will usually invite the buying of shares through a document known
as an Offer Document whose meaning is provided under section 2 of the company
Act as follows; Offer Document mean
“any Document, prospectus, notice, circular , advertisement, or any other invitation,
offering to the public for subscription or purchase any shares or debenture of a
company or any interest therein, or any right to acquire any shares or debenture or
any interest therein.
Procedure relating to Offer Document
a. An offer Document must be dated, and the date is taken as the date of publication of
that offer document. Section 46 of Company Act.
b. Before an offer document is issued it must be delivered to the registrar for registration,
on or before the date of its publication. Section 49(1) of the company Act
c. Before such Registration a copy of offer document has to be delivered and approved
by the Capital Market and Securities Authority. Section 49(3) of the company Act
d. The Offer Document must so state that a copy was do delivered. Section 49(2) (a) of
the company Act
e. It must be signed by every person who has been named therein as the director, or his
agent who has been authorized in writing. Section 49(1) of Co. Act
f. It must contain reports as required by minister of finance from time to time, or by
capital market and finance. S. 47(1)
Only after the above requirement have been met and the offer document registered then it
can be issued to the public to apply for shares in a particular company
The shares offered to the public must not exceed the capital Clause in the company’s
memorandum of Association.

FORMS OF SHARES
a. Authorized share capital (Nominal share) is the sum mentioned in the Capital
clause of memorandum of association
 It’s the amount of shares which the company
b. of share capital which the memorandum of association authorize the company to 52
issue.
c.

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Ways of defining Share capital in a company
1. Authorized Share Capital
The total capital that a corporation accepts from its investors by issuing shares that are listed
in the firm’s official documents is known as authorized share capital. Because a corporation is
registered with this capital, it is also known as Registered Capital or Nominal Capital. The limit
of Authorized Capital is set by the Capital Clause in the Memorandum of Association,
 At the time of registration of a company, the Memorandum of Association mentions the
amount of capital a company is authorized to raise from the public by selling shares
which is known as Authorized Capital or Normal Capital or Registered Capital.
Issued Share + Unissued Share = Authorized Share.

2. Issued Share Capital

The portion of Authorized Share Capital that is issued to the public for subscription is known
as Issued Share Capital. Issuance, allocation, or allotment are the terms used to describe
the act of issuing shares. To put it another way, Issued Share Capital is the subset of
Authorized Share Capital. A subscriber becomes a shareholder after the allotment of shares.

3. Unissued Share Capital

Companies, as previously stated, commonly issue shares from time to time. As a result, their
authorized and issued share capital will differ. The difference between the two sums will be
the company’s unissued share capital. This unissued capital refers to the number of shares
that a firm has available to raise capital.

4. Subscribed Capital
The portion of issued capital that has been sold to the public is known as subscribed capital. It
is not necessary for the issued Capital to be fully subscribed by the general public. It is the
portion of the issued capital for which the corporation has received an application.

5. Called-Up Capital
Called-up Capital is the portion of the Subscribed Capital that comprises the shareholder’s
payment. The capital is not given to the company in its whole at once. It makes use of a
portion of the subscribed capital when it is required in installments. Uncalled Capital refers to
the remainder of the Subscribed Capital.

6. Paid-Up Capital
Paid-up Capital is the portion of Called-up Capital that is paid by the shareholder. The
shareholder does not have to pay the sum requested by the corporation. The shareholder 53
may pay half of the called-up Capital, referred to as Reserved Capital, to the company.

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7. Uncalled Share Capital
When a company issues shares to its shareholders, it expects them to pay for them. They
may, however, choose not to do so. Uncalled share capital refers to shares that have been
issued but not yet been claimed. This capital also refers to the shareholders’ contingent
liabilities. It is the remaining amount after deducting the called-up capital from the total
number of shares allotted.

8. Reserve Share Capital

Reserve capital is the amount of stock that a firm can’t sell unless it goes bankrupt. These
shares are usually issued following a special resolution that receives more than three-
quarters of the vote. Companies, likewise, cannot change their articles of incorporation to
overturn this choice. Reserve share capital serves a specific purpose: to make liquidation
easier.

Reserve capital is subject to a number of restrictions. Companies are unable to use this
money as a form of security or convert it to ordinary capital. Companies, on the other hand,
can have it overturned by obtaining a special court order. Reserve share capital reflects the
capital that will not be available unless the company is liquidated.

9. Fixed and circulating share capital

A company’s subscribed capital includes circulating share capital. Operational assets, such
as bank reserves, book debts, invoices receivable, and so on, provide this capital. These
funds comprise funds used for a company’s fundamental operations. Fixed capital, which is
made up of a company’s fixed assets, is also closely related.

TYPES OF SHARES
The types of shares are
a. Preference shares
b. Ordinary shares

Ordinary Shares, are shares which do not have any special right attached to them.
 Ordinary shares, also called common shares, give their owners the right to vote at
company shareholder meetings but have no guaranteed dividend.

Advantage of Ordinary shares

a. Attend General Meetings and vote: Ordinary shareholders can participate in
internal corporate governance through attending annual meetings and voting. 54
They are allowed to vote on important matters such as appointing directors.
They can have one vote per share subject to the Company’s Constitution;

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 b. Share in Company’s profits: Shareholders can receive dividends if the
Company has made profits and decided to distribute them;
c. Have a distribution on winding up: If the Company is wound up, shareholders
entitled to any remaining assets of the Company after all its debts are cleared;
d. Limited liability: Shareholders are protected against the financial obligations of
the Company and are only liable for the value of their shares.

Disadvantages of the Ordinary Shares

a. Distribution of dividends: Priority would be given to Preference shareholders when the
dividends are distributed;
b. No guaranteed right to receive dividends: The company can make a decision not to
distribute the dividends depending upon the situation.

Preferential shares,
Preference shares are company stock with dividends that are paid to shareholders before
common stock dividends are paid out.
 Preferential shares contains preferential right i.e rights which are above other rights
e.g. special right in the payment of dividends.
 For preferential shareholder the company declare they will give special right to the
shareholders
 The preferential shareholder, may either be Cumulative or non cumulative preferential
shares.
 Preferential shares received preferential right in payment of dividends. Dividends is
the ratio of capital which is paid to shareholder when the company get profit

Forms of preferential shares

a. Cumulative Preferred Stock Definition

Cumulative preferred stock refers to shares that have a provision stating that, if any dividends
have been missed in the past, they must be paid out to preferred shareholders first.
b. Current Dividend Preference Definition and Example
Current dividend preference is a safety feature offered to preferred shareholders, entitling
them to receive dividends distributions before common shareholders.
c. Noncumulative Definition and Examples
Noncumulative, as opposed to cumulative, refers to a type of preferred stock that does not
pay the holder any unpaid or omitted dividends.
55
d. Retractable Preferred Shares Definition

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Retractable preferred shares are a form of preferred stock that offers an option to sell shares
back at a set price to the issuing company.
Advantage of preferential shares
 Preferential shareholders have preferential rights to a dividend
 Priority claims on the assets upon liquidation of the Company;
 Redeemable shares: the Company may “buy back” the Preference shares from the
holder at a fixed price; or
 Convertible shares: the holder can exchange Preference shares for other capital
instruments (such as convertible notes) issued by the Company.
Disadvantages of Preference Shares
i. No voting rights: Preference shareholders do not have the general right to vote
at meetings;
ii. Higher dividends: Preference shares carry a higher rate of dividend than the
interest of debentures.
TRANSFER OF SHARES
Shares are valuable property, so shares are transferred from one person to another. Shares
are transferred by way of sale agreement, so in this you must prepare a sale agreement.
 The company Act, provide that the transfer of shares must be signed and stamped and
it has to be in writings . Section 77 of the company Act
 So in this you have to prepare the sale agreement and transfer deed.
 After preparing the documents submit it to the TRA together with financial statement
 After that you will lodge it to the Register of company
 Upon Registration the company shall issue a certificate forth with. Section 80 of
company Act
 The law provides that if they refuse to issue a certificate go to the High Court
 Nowadays all transfer of shares are done electronically in the ORS
 The public company only are allowed to transfer shares but it’s limited for private
company. Section 27, 45 and 74
TRANSMISSION OF SHARES
 Is the transfer of share between the deceased and the survival/beneficial of the
deceased.
 Upon death of the shareholders, the shares will pass to the survival one 56
 When you inherit shares it mean that you inherit right and liabilities

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DEBENTURES
Is the security document given by the company to charge the property of a company to
financial institution.
 The debenture, is the document which either creates a debt or acknowledge it
 Debentures are therefore, a form of security which may be brought and sold in such a
way as shares
 In order to give lenders some security against non – payment of their loans a charge is
often made against the assets of the company
 The debenture holders are regarded as the creditors of the company and members
 These type of security are called charges
CHARGES
Charge, is an interest or right which a lender or Creditors obtains in the property of the
company by way of security that the company will pay back the debt.
 When the lender has a charge over an asset of the company he may have the powers
to sell that asset and recover his debt upon the borrower’s default on a repayment of
such debt.
 A charge may be created out of mortgage of the company. Section 97(5) of the
company Act
Types of Company’s Charges
a.Fixed Charge
 Is the charge which is against a specific, clearly and well defined property of the
company
 Is where the company list fixed properties which can be attached to the loan as
security for the loan e.g. land, building, motor vehicle
b.Floating Charge
 Is the charge that does not list any property i.e all properties of the company, (current
and future properties) are subject to a charge
 Kama charge haziko listed hauwezi kuviuza hivyo vitu on the default of the borrower
mpaka ufuate process inayoitwa Crystalization of Assets.

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Crystallization
 It refer to the point at which floating charge can be treated as if it has been created as
fixed charge. In other words, a floating charge at this point is turned into a specific
charge.
When does floating charge become fixed / when does crystallization occur
A floating charge will become fixed upon the following conditions
 When the company ceases to carry on its business
 When the company is liquidated (is wound up )
 When the creditors enforces his security by the appointment of receiver
 When the holder of the charges act with authority from the content of the debenture to
convert the floating charge into fixed charge

REGISTRATION OF CHARGES (PART IV OF CO. ACT)

 Every charge whether fixed or floating charge that has been created in Tanzania to
be effective must be registered with the registrar of the company within 42 days of its
creation
 It’s provided under Part IV of the Company Act, section 96,97 and 100 of the Act.
Charges which has to be registered
Section 97(1) identifies charges which may be registered as follows
 A Charge for the purpose of security any issues of debenture
 A charge on uncalled share capital of the company
 A charge created or evidenced by an instrument which, if executed by an individual,
would require Registration as bill of sales
 A charge on land wherever situation or any interest therein
 A charge on books debt of the company
 A charge on ship or aircraft or any ship in a ship
 A charge on goodwill, or on any intellectual property
Duty to register charges
 It’s the of the company to register the charges. Section 100
 However the interested person may register it is own cost and claim compensation
58
from the company. Section 100(2)

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Effect of Registration of charge
 It act as a notice to the public at large that the charge holder has interest in the
charged property
 Once a certificate of charge is issued by the registrar, it’s inclusive evidence that the
document creating the charge is property Registered
Consequence of Non – Registration
 A charge which is compulsory registerable but which is not registered is void. Section
97 of company Act
 Omission to register the particulars of charges as required is punishable with fine
section 101(2) of Company Act

MEMBERSHIP OF A COMPANY
A member is any person who has agreed in writing to become a part of the company and
also hold shares of the company.
 A person who is competent to contract may become a member of the company. A
minor is incompetent to become a member of the company; an agreement with the
minor is absolutely void.
How to become a member
A person may become a member of a company in the following way
 Membership by subscription, the subscribers of the memorandum of association of
a company
 Members by application and Registration, every other person who agrees in writing
to become a member and those name is entered in the registrar of the members as by
company Act
 Members by qualifying share; the company act does not require directors to hold
any shares at all. The article of Association of a company may require the director of
that company to hold some minimum shares at the time of his appointment within such
time as prescribed under the Company Act, this holding of minimum shares is known 59
as “Qualification of Directors “

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Register of members
 This is the list that contain the records of names of all members of the company
 Each and every company is by law required to keep a register of all its members that
contain the; names , address, and the shares they have taken and if possible the class
of share taken and the date in which each member become or ceased to be a
member. Section 115 – 116, 451
Right of members
 Right to vote
 Right to demand a poll
 Right transfer of shares
 Right to participate to appoint a director, auditors and
 Right to receive dividend when declared
Cessation of membership
 By transfer of shares
 By forfeiture of his shares on non – payment of call due
 By death
 By company selling shares in exercise of its right under the articles of association
 By recession of contract of membership on the ground of misrepresentation or mistake
 By a company redeeming of redeemable shares
 By court or any other competent authority

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 MANAGEMENT OF A COMPANY
The company is managed by two powerful organs which are
 The Company Meetings
 The Board of Directors (Directors)

A.THE COMPANY MEETINGS

A company is an association of several persons. Decisions are made according to the view of
the majority. Various matters have to be discussed and decided upon. These discussions
take place at the various meetings, which take place between members and between the
directors. Needless to say, the importance of meetings cannot be under-emphasized in case
of companies. The Companies Act, Cap 212 contains several provisions regarding meetings.
These provisions have to be understood and followed.

 For a meeting, there must be at least 2 persons attending the meeting. One member
cannot constitute a company meeting even if he holds proxies for other members.
 Section 133 to 150 of the Company Act of Tanzania, provides for meetings of the
company. These provisions cover meetings of both public and private company
 The section under this part consist of both altered rules and unaltered rules
 Unaltered Rules are those sections or provisions in the company Act which are
mandatory as they cannot be changed. These rules governing meetings cannot be
changed.
 Altered rules these are provisions which can be changed. Section 136 of the company
Act is the good example of unaltered rules

KINDS OF COMPANY MEETINGS

Broadly, meetings in a company are of the following types: -
 Class meetings
 Meeting of members
 Meeting of Board of Directors
 Others meetings
 Meeting of creditors

I.CLASS MEETINGS
61
Are meeting which are held by holders of a particular class of shares e.g. Preferential
shareholders

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  Such meeting are normally conducted when there is violation of some rights of that
particular class of shares
 Section 73 of the Company Act , provide for class meetings on violation of
shareholders right
 Class meetings are held to pass resolution which will bind only members of that class
concerned and only members of that class can attend and vote
 Procedures for the calling are the same as AGM unless otherwise stated in the Article
of association

II. MEETING OF MEMBERS

These are meetings where the members / shareholders of the company meet and discuss
various matters. Member’s meetings are of the following types: -

a. Annual General Meeting: [s.133 of Cap 212]

 Is the kind of meetings required to be held by every company each year
 These meetings must be held by every type of company, public or private, limited by
shares or by guarantee, with or without share capital or unlimited company, once a
year.
 Every company must in each year hold an annual general meeting. Not more than
15 months must elapse between two annual general meetings.
 However, a company may hold its first annual general meeting within 18 months
from the date of its incorporation. In such a case, it need not hold any annual general
meeting in the year of its incorporation as well as in the following meetings
 A notice of not less than 21 days before the meeting is required to be served to all
members entitled to attend a meeting. Section 117 (2) of the Co. Act
 The notice must state that the meeting is an annual general meeting. The time, date
and place of the meeting must be mentioned in the notice.
 The notice of the meeting must be accompanied by a copy of the annual accounts of
the company, director’s report on the position of the company for the year and
auditor’s report on the accounts.
 Companies having share capital should also state in the notice that a member is
entitled to attend and vote at the meeting and is also entitled to appoint proxies in his
absence.
 A proxy need not be a member of that company. A proxy form should be enclosed 62
with the notice. The proxy forms are required to be submitted to the company at least
48 hours before the meeting.

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  The AGM must be held on a working day during business hours at the registered
office of the company or at some other place within the city, town or village in which
the registered office of the company is situated.
 A company may, by appropriate provisions in its articles, fix the time for its annual
general meeting and may also by a resolution passed in one annual general meeting
fix the time for its subsequent annual general meetings.
 In case of default in holding an annual general meeting, the consequences are
provided under section 133(4) & (7)
 Business to be transacted at Annual General Meeting: At every AGM, the following
matters must be discussed and decided. Since such matters are discussed at every
AGM, they are known as ordinary business. All other matters and business to be
discussed at the AGM are special business.

The following matters constitute ordinary business at an AGM (s. 133(1): -

 Consideration of annual accounts, director’s report and the auditor’s report

 Declaration of dividend
 Appointment of directors in the place of those retiring
 Appointment of and the fixing of the remuneration of auditors.
 In case any other business (special business) has to be discussed and decided upon,
an explanatory statement of the special business must also accompany the notice
calling the meeting.
 The notice must also give the nature and extent of the interest of the directors or
manager in the special business, as also the extent of the shareholding interest in the
company of every such person. In case approval of any document has to be done by
the members at the meeting, the notice must also state that the document would be
available for inspection at the Registered Office of the company during the specified
dates and timings.

b. Extraordinary General Meeting [s.134]

 This refers to any meeting of the company which is not AGM, called for transacting
some argent or special business which may not be postponed till next AGM.
 Extra Ordinary General Meeting is always called by directors on their own or upon the
requisition of the members. 63
 Such meeting is usually called by the Board of Directors for some urgent business
which cannot wait to be decided till the next AGM.

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  The notice must/ should also give the nature and extent of the interest of the directors
or manager in the special business, as also the extent of the shareholding interest in
the company of every such person.
 The Articles of Association of a Company may contain provisions for convening an
extraordinary general meeting. E.g. it may provide that “the board may, whenever it
thinks fit, call an extraordinary general meeting” or it may provide that “if at any time
there are not within the country, directors capable of acting who are sufficient in
number to form a quorum, any director or any two members of the company may call
an extraordinary general meeting”.

III. OTHER MEETINGS

a. Meeting of debenture holders
 A company issuing debentures may provide for the holding of meetings of the
debenture holders.
 At such meetings, generally matters pertaining to the variation in terms of security or to
alteration of their rights are discussed.
 All matters connected with the holding, conduct and proceedings of the meetings of
the debenture holders are normally specified in the Debenture Trust Deed.
 The decisions at the meeting made by the prescribed majority are valid and lawful and
binding upon the minority.

b. Meeting of creditors
Meeting of the creditors refers to the type of company meeting held when a company
proposes to make a scheme or arrangement with its creditors
 This kind of meeting can be done when the company is on a running concern or in the
event of winding up
 It can be called where a company may enter into an arrangement with creditors with
the sanction of the court for reconstruction or any arrangement with its creditors
 E.g. Under Section 261 & 262, a company may enter into arrangements with creditors
with the sanction of the Court for reconstruction or any arrangement with its creditors.
 The court, on application, may order the holding of a creditors’ meeting. If the scheme
of arrangement is agreed to by majority in number of holding debts to value of the
three-fourth of the total value of the debts, the court may sanction the scheme. A
certified copy of the court’s order is then filed with the Registrar and it is binding on all 64
the creditors and the company only after it is filed with Registrar.

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  Similarly, in case of winding up of a company, a meeting of creditors and of
contributors is held to ascertain the total amount due by the company and also to
appoint a liquidator to wind up the affairs of the company.

IV. MEETING OF THE BOARD OF DIRECTORS

A Meeting of the board of directors also known as a board meeting is the type of company
meeting that aims at discussing and deciding all matters relating to the company and it is a
policy for the management of the company.
 The Meeting Of the Board of Directors is the most important meeting and the most
frequently held meeting of the company.

V. MEETING OF COMMITTEES OF DIRECTORS

The Meeting of committees of directors is the type of meeting done by the committee which
has been delegated powers of the directors in big companies.
 By delegating their power to the committee fully board does not need to meet more
frequently It can be ad hoc or standing committee and to be valid the article of
Association must provide for the same.

REQUIREMENT OF A VALID MEETING

a. Must be properly convened. The persons calling the meeting must be authorized
to do so.
 This power to summon members of the company into the company meeting is vested
to the Board of directors
 The chairman is the head of the meeting. Generally, the chairman of the Board of
Directors is the Chairman of the meeting.
 Unless the articles otherwise provide, the members present in person at the meeting
elect one of themselves to be the chairman thereof on a show of the hands.
 If there is no Chairman or he is not present within 15 minutes after the appointed time
of the meeting or is unwilling to act as chairman of the meeting, the directors present
may elect one among themselves to be the chairman of the meeting.
 If, however no director is willing to act as chairman or if no director is present within 15
minutes after the appointed time of the meeting, the members present should choose
one among themselves to be chairman of the meeting.
 If, after the election of a chairman on a show of hands, poll is demanded and taken 65
and a different person is elected as chairman, then that person will be the chairman for
the rest of the meeting.

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 b. Proper Notice. Proper and adequate notice must have been given to all those entitled
to attend.
 Notice of every meeting of company must be sent to all members entitled to attend
and vote at the meeting.
 The notice may be given to any member either personally or by sending it by post to
him at his registered address,
 Where notice is sent by post, service is affected by properly addressing, pre-paying
and posting the notice. A notice may be given to joint holders by giving it to the joint
holder first named in the register of members.
 A notice of meeting may also be given by advertising the same in a newspaper
circulating in the neighborhood of the registered office of the company and it shall be
deemed to have been dully served on every member.
 A notice calling a meeting must state the place, day and hour of the meeting and must
contain the agenda of the meeting. If the meeting is a statutory or annual general
meeting, notice must describe it as such.
 Where any items of special business are to be transacted at the meeting, an
explanatory statement setting out all materials facts concerning each item of the
special business including the concern or interest, if any, therein of every director and
manager is any, must be annexed to the notice. If it is intended to propose any
resolution as a special resolution, such intention should be specified.
 A notice convening an AGM must be accompanied by the annual accounts of the
company, the director’s report and the auditor’s report. The copies of these documents
could, however, be sent less than 21 days before of the date of the meeting if agreed
to by all members entitled to vote at the meeting.
 If you want to use a proxy, he or she must prepare a proxy instrument
 A proxy (Representative) is a person who has been appointed to attend and vote at
the meeting on behalf of the member and that person must be given a proxy
instrument. Section 138(1) of the company Act
 A proxy can vote can only vote on poll, he or she is not required to vote on show of
hand. Section 138(1)(c) of the company Act
 A member of the company shall not be entitled to appoint more than one proxy to
attend on the same occasion.
66

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 c. Quorum
 Quorum refers to the minimum number of members who must be present at a
meeting in order to constitute a valid meeting.
 A meeting without the minimum quorum is invalid and decisions taken at such a
meeting are not binding. The articles of a company may provide for a quorum
without which a meeting will be construed to be invalid.
 Unless the articles of a company provide for larger quorum, 2 members personally
present shall be the quorum for a general meeting of a company Section 136 of
Company Act
 It has been held by Courts that unless the articles otherwise provide, a quorum
need to be present only when the meeting commenced, and it was immaterial that
there was no quorum at the time when the vote was taken.
 If the Quorum is not made it can invalidate the meeting

d. Minutes of the company

 Meeting show how the company meeting was conducted
 It is simply a summary of matter which were transacted in the meeting i.e proceeds of
the meeting
 Minutes usually are taken by the company secretary. In most cases secretaries are
lawyers
 The current amendments require the secretary of the company to be accredited
accountant or lawyer.
 Before the next meeting begin you must ensure that the former minutes of the meeting
is signed

e. Resolutions of the company

Resolutions mean decisions taken at a meeting. A motion, with or without amendments is put
to vote at a meeting. Once the motion is passed, it becomes a resolution. A valid resolution
can be passed at a properly convened meeting with the required quorum. There are broadly
three types of resolutions: -

Types of Resolutions in the company meetings

In company meetings when a motion passed is called a resolution.
There are two common types of resolutions that can be passed at a company meeting. The 67
first is a special resolution and the second is an ordinary resolution

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 i. Special Resolutions
A special resolution is a type of resolution which Requires a vote of 75% of members present
in person or by proxy, who are entitled to vote and do vote. Section 143
 The meeting at which a special resolution is proposed must have had at least 21 days’
notice unless a shorter period was agreed by a majority in a number of members
holding at least 95% of the shares.
 Certain matters can only be decided by special resolution and the articles cannot
provide to the contrary. A printed copy of the special resolution must be sent to
Registrar within 15 days of it being passed.

Examples where special resolutions are required are:-

 To alter the domicile clause of the memorandum from one State to another or to alter
the objects clause of the memorandum.
 To alter / change the name of the company with the approval of the central
government
 To alter the articles of association
 To reduce share capital.

ii. Ordinary resolutions

An ordinary resolution is the type of resolution which is passed by a simple majority (at least
51 percent vote in favor) at any general meeting of the shareholders.

Registration of Resolutions and Agreements (s. 145)

 A copy of each of the following resolutions along with the explanatory statement in
case of a special business and agreements must, within 30 days after the passing or
making thereof, be printed and duly certified under the signature of an officer of the
company and filed with the Registrar of Companies who shall record the same: -
 All resolutions of the board of directors of a company or agreement executed by a
company, relating to the appointment, re-appointment or renewal of the appointment,
or variation of the terms of appointment, of a managing director
 All resolutions or agreements which have been agreed to by all members of any class
of members but which, if not so agreed, would not have been effective unless passed
by a particular majority or in a particular manner and all resolutions or agreements
which effectively bind all members of any class of shareholders though not agreed to 68
by all of those members.
 Resolutions for voluntary winding up of a company.

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Difference between ordinary resolutions and special resolutions
 An ordinary resolution is that which is passed by a simple majority (at least 51 percent
vote in favor) at any general meeting of the shareholders while A special resolution is
one that is passed by at least three-fourths (3/4th) majority of the members voting on it
at the General Meeting
 A previous notice for an ordinary resolution is not essential while A 21 days notice
must have been given for the meeting in which a special resolution is passed.
 The ordinary resolution normally does not require filing with the registrar while a copy
of the special resolution must be filed with the Registrar within 30 days of the date of
its passing.
 An ordinary resolution is required to transact ordinary business while A special
resolution is required to transact special business.

VOTING AT COMPANY MEETINGS

There are two methods of voting at company meetings, the first is by show of hands and the
second is by poll.

a. Show of hands Vote

At company meetings show of hands, a vote can be by show of hands unless articles provide
otherwise.
 Each member has just one vote regardless of the number of shares he has – hands
are counted and the result is declared by the chairman. The result is conclusive once
recorded in the minutes.
 Generally, initially matters are decided at a general meeting by a show of hands.
 If the majority of the hands raise their hands in favor of a particular resolution, then
unless a poll is demanded, it is taken as passed. Voting by a show of hands operates
on the principle of “One Member-One Vote”. However, since the fundamental voting
principle in a company is “One Share-One Vote”,
NB: Proxies cannot vote on a show of hands unless the Articles of association allow it.

b. Voting by Poll
Voting by poll is conducted when members demand it. A company cannot refuse a demand 69
for a poll made by: – at least 5 members have the right to vote, or – any member/members
representing one-tenth or more of the total voting rights.

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  If a poll is demanded, voting takes place by a poll. Before or on declaration of the
result of the voting on any resolution on a show of hands, the chairman meeting. Suo
moto (of his own motion) that a poll be taken. However, when a demand for poll is
made, he must order the poll be taken.
 Members normally have one vote per share in a poll. Members are entitled to exercise
their votes according to their own interests.
 The chairman may order a poll when a resolution proposed by the Board is lost on the
show of hands or if he is of the opinion that the decision taken on the show of hands is
likely to be reversed by poll. When a poll is taken, the decision arrived by poll is final
and the decision on the show of hands has no eftaken
 A poll is allowed only if the prescribed number of members demands a poll. A poll
must be ordered by the chairman if it is demanded (s. 139 & 140):-
 By such number of members for the time being entitled under the articles to vote at the
meeting, as may be specified in the articles.
 If no provision is made by the articles with respect to the right to demand poll, by three
members who hold not less than fifteen percent of the paid up share capital of the
company.

Motion
 Motion means a proposal to be discussed at a meeting by the members. A resolution
may be passed accepting the motion, with or without modifications or a motion may be
entirely rejected.
 A motion, on being passed as a resolution becomes a decision.
 A motion must be in writing and signed by the mover and put to the vote of the
meeting by the chairman. Only those motions which are mentioned in the agenda to
the meeting can be discussed at the meeting. However, motions incidental or ancillary
to the matter under discussion may be moved and passed. Generally, a motion is
proposed by one member and seconded by another member.

Amendment
 Amendment means any modification to a motion before it is put to vote for adoption.
Amendment may be proposed by any member who has not already spoken on the
main motion or has not previously moved an amendment thereto. 70
 There can be an amendment to an amendment motion also. A motion must be in
writing and signed by the mover and put to the vote of the meeting by the chairman.

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 An amendment must not raise any question already decided upon at the same
meeting and must be relevant to the main motion which it seeks to amend.
 The chairman has the discretion to accept or reject an amendment on various grounds
such as inconsistency, redundancy, irrelevance, etc. If the amendment is adopted on a
vote by the members, it is incorporated in the body of the main motion. The altered
motion is then discussed and put to vote and if passed, becomes a resolution.

B. DIRECTORS (BOARD OF DIRECTORS) (Section 181 – 214)

A company is not a natural person so it works through people called directors. These are
officers who constitute the board of directors. A company therefore cannot work on its own
although it is a person, this it relies much to the natural person for it to operate.
 Section 2 of the company Act defines who the director of the company is. A director
is defined as “any person occupies the position of directors by whatever name called.
 The title is not the determining factor. In the case of Re Forest Dean Company, 1878
where Jessel MR. Observed that “ it does not matter what their position is”
 Section 181 of the company Act, has entrusted the director with management of the
company by providing that the directors are vested with all powers necessary for
managing, directing and supervising the management and business affairs of the
company.
 According to Lord Denning, Directors are the directing mind of the company. His
lordship gave a clear position regarding the directors of the company as the directing
mind of the company since it is not a natural person

TYPES OF DIRECTORS
a. Executive directors
 This are directors involved in day to day management of the company
 Are directors concerned with the actual management of the company
 They are engaged by the company to work on full time basis
 Generally, he must have a contract with the company that give him the position as
such.
 He have extensive management power delegated to him by the articles and may, in
71
practice have specific title within the company, for example Managing Director
b. Non – executive directors

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  This are directors who are not involved in day to day management of the company
and are appointed from outside
c. Alternative directors
 Are directors nominated by the directors to act in their absence. The article of
Association must provide for alternative directors.
 These are persons, who are nominated by Directors to act in their absence
 They can only be appointed with the agreement of the Directors and he is entitled
generally to perform all the function of his appointer in his absence
d. Shadow directors
 This is any person other than professional advisor with those instructions the
company normal comply/ follow
e. Defacto directors
 Is the person who has not been validly appointed or who is disqualified but who is in
effect of position and act as if he was a director.
 Example Section 194(1) of the company Act No. 12 of 2002 provide that a person
who is under the age of 21 or he had not attained the age of 70 years are not
capable of being appointed as the directors of the company. This person become
Defacto directors

APPOINTMENT OF DIECTORS
 As per Section 192(1) provide that, directors must be appointed at the general meeting
of a public company a company motion for the appointment of two or more person as
the director of the company by a resolution of the company.
 Directors of the company are appointment by filing form No. 14 of the company Forms.
 The appointee must consent to the directors
 Then the company must fill form No. 210 for appointment of directors

Number of directors
 Section 186 of the company Act provides that “Every company shall have at least two
directors.

Qualifications of directors
 Section 194(1) of the company Act, provide that the directors must be at the age of
majority that is of the age of 18 years and above, as per the Miscellaneous 72
Amendment Act No 3 of 2019 which amend section 194 of the company Act.
 He must be of sound mind

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  Must not be disqualified by any law. Example if he or she has been declared bankrupt
or insolvent by a competent court in Tanzania or elsewhere. This is per Section 196(1)
of the company Act
 Directors must have share qualifications, where the Article of Association of the
company so directs. Section 143(1)

Retirement
 He or she may retire on voluntary basis

Removal of directors
 As per Section 193(1) of the company Act, provide that, a company may by ordinary
resolution remove a director before the expiration of his period of office.
 Once the director is removed the company has to fill Form Number 210(b) of the
company form which must be signed by the succeeding directors

Powers of directors
 The Board of directors of the company is entitled to exercise such power as they are
Authorities to do under the MEMART

Restrictions of directors
 The Article of Association provides for things which the director of the company cannot
do.
 The company also provide for things which cannot be done by the directors.

Meeting of the director

 Directors has power to convene meeting so as to make smooth their day to day
functions of company
 In the meeting there must be at least two directors.

Duties of the director

 Duty of care and skills. Section 185
 Duty to act in good faith. Section 182
 Duty to disclose interest. Section 209
 Duty in relation to employees. Section 183 73
 Duty to exercise power and proper function. Section 184
 Contractual duty

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Liabilities of a director
Liabilities of directors may either be Criminal or Civil in nature depending on the wrong or fault
on the side of the director. They may be jointly or severally held liable depending on the
nature of the wrong or offense committed.

Criminal Liability of directors of the company

 Section 51(1) of the company Act, provide for Criminal liability of the directors for Mis –
statement in offer document. This section provide that “ where an offer document
issued after the commencement of this Act include Untrue statement, any person who
Authorized the issue of offer document shall be liable for imprisonment or fine or
both……”
 Section 70(3) provide for liability of the director for failure to issue a certificate of
solvency without a reasonable grounds to his opinion
 Section 100(3) provide for liability of directors and the company for default in
Registration of charges of debenture created under assets of the company
 Section 226(3) of the company Act, provide for liability of the directors for destruction of
company documents
 Section 383 and 384 of the company Act provide for liability of the directors of the
company for fraudulent trading and wrongful trading in the course of Winding up of
the company

Civil Liability
 Section 34(1),(2) and (3) of the company Act impose civil Liability for improper use of
the of Limited in case of private company or PLC in case of public company
 Liabilities on tort
 Liabilities in personal wrongs
 Liability may also be found where the individual has breached any statutory duties
placed on holders of the office which they occupy

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 COMPANY SECRETARY
As per section 187(1) provide that “every company must have a secretary “
 It is the duty of the company directors to appointment the secretary of the
company. Section 187(2) (a)
 After appointing the Secretary the directors must fill form No. 210 of the company
Forms

Qualifications of secretaries
 Section 187(2) of the company Act, provide that a secretary of the company is the
person who appear to have a requisite knowledge and experience to discharge the
function of secretary of a public company
 Nowadays secretaries are required to be the CPA holder

Functions of secretary of the company

a. Sign annual return
b. Being a secretary to the board and the annual general meetings
c. Prepare the company register
d. Must ensure that the company comply with the MEMART
e. Ensure safe, custody and proper use of common seal of company
f. Creating directors report in behalf of the board of directors

Termination of Company Secretary

 The secretary contract is terminated by the directors upon filling Form No. 210(b) of
the company form

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 THE SALES OF GOODS IN TANZANIA
Laws governing sales of goods
Sales of goods in Tanzania is governed by the
 Sales of Goods Act, Cap 214 (SOGA),
 The General Principles of common law relating to business as well as
 Customary rules relating to business.
The Sales of Goods Act, as the law which govern the sales of goods contract, has laid down
certain terms which intends to protect a party to the contract as well as rules of general
application where the parties fail to provide for contingencies which may interrupt the smooth
performance of the contract.
A Contract of Sales of Goods
Section 3 (1) of the Sales of Goods Act, define a sale of goods contract as “ A contract
whereby the seller transfer or agree to transfer the property in good to the buyer for money
consideration called price.
In this context, ‘property’ means ‘ownership’, so the object of such a contract is to transfer
ownership in the goods to the buyer; however, the contract is only covered by the SoGA if
the buyer’s consideration is money
Parties to Sale of Goods agreement
There are two parties in the Sales of sales, that is the seller and the Buyer.
 The seller is the one who sells or agree to sell goods. Whereas, Buyer is a person who
buys or agree to buy goods. Section 2(1) of Cap 214
 Hence the two parties should be different person, and in case a person purchase his
own goods it’s not a sale.
Types of agreement in sale of goods contract
There are two types of agreement in sales of goods contract which are the contract of sale
and Agreement to sale
Contract of sales: Is an agreement where the seller transfer or agree to transfer the property
in goods to the buyer for money consideration. Section 3(1) of Cap 214
Agreement to sell: this take place at future time or subject to some condition to be fulfilled 76
after the transfer. Property will not pass immediately to the buyer at present as there may be
no that property to sell 3(3) of Cap 214

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  An agreement to sell becomes a sale when the time elapses or the conditions which
are fulfilled, subject to which the property in goods is to be transferred.
THE CONCEPT OF GOODS
Section 2(1) of the Cap 214, define goods to include all personal charter which are tangible
and capable of moving, it includes all things in action , money and things attached or forming
Part of the earth.
 Chattel means moving property
 In sale of goods you have to satisfy that what you are selling is the moving property i.e
the sale of goods is the sale of moving property
TYPES OF GOODS
There are three kinds of goods i.e the existing goods, future goods and contingent goods
Existing goods, These are goods with physical existence under the ownership of the seller
at the time of entering the contract of sale. Existing goods may be either specific (ascertained)
or unspecific (unascertained) goods
 Ascertained (specific) goods, they are one which have been identified and agreed
upon at the time a contract of sale is made by parties. Section 2(1), 7(1) & 19(1) of
Cap 214
 Unascertained (unspecific) goods, these are goods which have not been identified
and agreed upon at the time of making the contract. Section 18 of the Cap 214
 Future goods, they are goods to be manufactured, produced, or acquired by the seller
after the making of the contract of sale. These goods may either not yet in existence or
be in existence but not yet acquired by the seller. E.g. Mussa agree to sell to
Mohamed all the milk that his cow may yield during the coming year
 Conditional (contingent) goods, these are goods either do not exist or are goods
which are to be manufactured in future. A contract of sale of contingent goods is
enforceable only if the event on the happening of which the performance of contract is
reliant happens. Short of that the contract become void
Illustration: if Tanzanian government enters into contracts of sale of five rescuing
helicopters with Chinese company on the condition that such helicopters should be
supplied when El – nino erupts in Tanzania.

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ESSENTIAL REQUIREMENT OF CONTRACT OF SALE
a. Parties
 There must be two district parties to a contract of sale that is the seller and buyer,
who are of the age of majority and with sound mind when contracting. Section 4 of the
Cap 214
b. Price (Consideration)
 Consideration for a contract of sale of goods must be mone6 G it’s called Price
 If no money is involved and parties exchange goods of equal value it become barter
trade. But when goods are sold partly for goods and partly for money, the contract
become one of sale. Therefore no valid sale can take place without a price. Section 11
of the Cap 214
 Price in contract may be fixed in the contract at the time of making the contract or may
be left to be fixed in the manner agreed by the parties. Section 10(1) of the Cap 214
c. Transfer of Property in the goods
 The word ‘property’ for the purpose of Contract of sales means ‘ownership’
 This means the transfer of ownership in goods from the seller to the buyer. In this the
one transfer his legal rights to own a property to the buyer. The buyer get the right in
Rem. Section 23 of the Cap 214
d. Goods
 Section 2(1) of the Cap 214, define goods to include all personal charter which are
tangible and capable of moving, it includes all things in action , money and things
attached or forming Part of the earth.
e. Sale and agreement to sale
 A sale is when the property in goods is immediately transferred from the seller to
the buyer at the time of making contract
 Agreement to sell, section 3(3) of SOGA provides for agreement to sell. In
agreement to sell goods do not pass immediately, it may in the future.
FORMATION OF CONTRACT OF SALE
 A contract of sale of goods may be in writing or oral contract or it may be partly in
writing or partly oral contract, or implied from conduct of the parties. Section 5, 6 of
Cap 214

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DISTINCTION BETWEEN SARE AND HIRE PURCHASE
Sale
 Here the buyer is bound to buy the goods with no option to return and the property in
goods passes to the buyer at once.
 Buyer can pass a good title to bonafide purchaser
 In sale, tax is payable
 Parties are seller and buyer
 In sale, Registration of contract is not mandatory
 In sale, seller takes risk of any loss resulting from insolvency of the buyer
 CS, buyer may get possession immediately or may decide not to get immediate
possession of the goods.
A hire purchase agreement
 Here the buyer has an obligation to return the goods if any latent defect is noted
before the last installments (as the mode of payment). here the goods pass till the last
installment is paid.
 Hirer cannot pass any title even to bonafide purchaser
 In hire purchase, there is no sales tax
 Parties are the hirer and owner
 In hire purchase, the agreement must be registered otherwise the contract become
unenforceable
 In hire purchase, takes no risk if the buyer undergo insolvency
 HP, hire is given immediate possession of the goods
 HP , till the last installment hirer remains Bailee and his or her installment are
regarded as hire charges for the use of goods, if default arises owner has right to
resume possession of goods without refunding the amount received till then, because
the ownership still rest with him.

DISTINCTION BETWEEN SARE AND BAILMENT

 Bailment the transaction under which goods are delivered by one person (the bailor)
to another (the Bailee) for some purpose, upon a contract that they be returned or
disposed of as directed after the purpose is accomplished.
Contract of Sale 79
 In a sale, the buyer acquires title and must pay for the goods.
 Is the transfer of ownership and possession.
 The buyer has complete control over the use of the purchased property
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  The buyer pays the price for the goods
 The buyer holds the ownership of the property until he sells the property to another
person.
 in contract of sale the transfer of title is absolute
 In sale the consideration is money.
Bailment
 the Bailee acquires possession and must return the identical object the Bailee
acquires possession and must return the identical object
 Is the transfer of possession only
 Bailee needs to use the property according to the instructions given by the bailer.
 The goods are required to return to the bailer after the specified period after
accomplishing the purpose of bailment.
 The bailer is not entitled to use the bailed property until the purpose of bailment is
achieved.
 in bailment the transfer is temporary
 In bailment no money is needed.

SUBJECT MATTER OF A CONTRACT OF SALE

MEANING OF GOODS
The subject matter of the contract of sale is essentially goods. Goods are tangible or movable
personal property other than money or things that have value whether tangible or not.

Section 2(1) of the law of sales of goods Act, defines the term good to include all personal
chattels that are tangible and being capable of being moved, and the provision exclude all
emblements (growing crops produced annually), money and things that are permanently
affixed or attached to the land such as the land, trees and houses.
 In economic terms, a good is a material that satisfies human wants and
provides utility, for example, to a consumer making a purchase while getting an
enough-satisfying product .
 The case of Mills v Stokman, draws a distinction of what are goods and what
are not goods, and according to this case a quantity of state which had been quarried
and then left on some land as waste material for many years was held to be part of the
land. Things like goodwill, copyright, trademark, patents, water, gas, electricity are all
goods.
 In the case of Commissioner of Sales Tax v Madhya Pradesh Electricity
80
Board24 , the Supreme Court observed that electricity can be transmitted, transferred,
delivered, stored, possessed, in the same way as any other movable property. If there
can be sale and purchase of electric energy like any other movable object, we see no

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 difficulty in holding that electric energy was intended to be covered by the definition of
“goods”.
 Generally, the term goods can be defined to include all things that are capable
of being moved from one place to another, being tangible, and those which can satisfy
the human needs and normally people make effort to acquire them.

CLASSIFICATION OF GOODS
Goods may be (a) existing, (b) future, or (c) contingent.

Existing goods
The existing goods may be (i)specific or generic, (ii) ascertained or unascertained.
 As far as goods are concerned they can be categorized into two major forms that is
existing goods which includes all goods that are in possession of the seller and which
have been agreed upon by the parties at the time of making a contract of sale where as
the future goods are those that are not yet in possession of the seller but such goods
will be available after making a contact of sale that is in future date as per section 7(1) of
the law of sales of goods Act.
 The existing goods may be either specific goods or ascertained goods that is are goods
that have been identified at the time of making a contract of sale, where as future goods
can either be unascertained or contingent goods. Unascertained goods (Generic) are
those which have not yet identified at the time of making a contract of sale where as
contingent goods are those which their availability depend upon occurrence or non-
occurrence of certain event as defined under section 7(2)26 .

SALES OF PERISHABLE GOODS

Effect of Perishing of Goods (Section 8 & 9 of SOGA)
In a contract of sale of goods, the goods may perish before sale is complete. Such a stage
may arise in the following cases:

a. Goods perishing before making a contract

 Where in a contract of sale of specific goods, the goods without the knowledge of the
seller have, at the time of making the contract perished or become as damaged as no
longer to their description in the contract, the contract is void. This is based on the rule
that mutual mistake of fact essential to the contract renders the contract void. (S. 8)
 If the seller was aware of the destruction and still entered into the contract, he is
estopped from disputing the contract. Moreover, perishing of goods not only includes
loss by theft but also where the goods have lost their commercial value.
81
b. Goods perishing after agreement to sell
 Where there is an agreement to sell specific goods and subsequently, the goods
without any fault of any party perish or are so damaged as no longer to answer to their

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 description in the agreement before the risk passes to the buyer, the agreement is
thereby avoided.
 The provision applies only to sale of specific goods. If the sale is of unascertained
goods. The perishing of the whole quantity of such goods in the possession of the
seller will not relieve him of his obligation to deliver. (Section 9).

MODE OF FIXING PRICE (S. 10-11 of SOGA)

Price is the consideration for a contract of sale that must be paid in form of money fixed by
parties or by third parties when parties agree the same. If no money is involved and parties
exchange goods of equal value it becomes barter trade. But when goods are sold partly for
goods and partly for money, the contract becomes one of sale.
 Therefore no valid sale can take place without a price. The price should be paid or
promised to be paid in legal tender money, unless otherwise agreed, that is to say it may
be paid in the form of a cheque, bank deposit and many other forms.

Modes of fixing prices

The price may be fixed:
a. At the time of contract by the parties themselves, or
b. be left to be determined by the course of dealings between the parties, or
c. may be left to be fixed in some way stipulated in the contract, or
d. May be left to be fixed by some third-party.

 Where the contract states that the price is to be fixed by a third-party and he fails to do so,
the contract is void. But if the buyer has already taken the benefit of the goods, he must
pay a reasonable price for them. If the third-party's failure to fix the price is due to the fault
of one of the parties, then that party is liable for an action for damages.
 Where nothing is said by the parties regarding price, the buyer must pay a reasonable
price, and the market price would be a reasonable price.
 In Hoadly v Mclaine it was said that when price is not fixed, the buyer must pay a
reasonable price. This was also stated in Clarke v Westrope.
 In Milnes v Gery where the defendant contracted to purchase at a price to be ascertained
in a specific mode, and no price was fixed in the mode, it was held that as price is of
essence of a contract of sale, there could be no concluded contract, which the court could
enforce.
 However consideration could be partly payable in money and partly in goods as it was
said in Aldridge v Johnson.30 Nevertheless the price in a contract of sale may be fixed
by the contract or may be left to be fixed in a manner thereby agreed or may be
determined by the course of dealing between the parties
 Read also the case of May & Butcher v. The king [1934] 2 KB 17 82

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 TERMS OF A CONTRACT OF SALE
Conditions and Warranties
The parties are at liberty to enter into a contract with any terms they please. As a rule, before
a contract of sale is concluded, certain statements are made by the parties to each other. The
statement may amount to a stipulation, forming part of the contract or a mere expression of
opinion which is not part of the contract.
 If it is a statement by the seller on the reliance of which the buyer makes the contract,
it will amount to a stipulation. If it is a mere commendation by the seller of his goods it
does not amount to a stipulation and does not give the right of action.
 The stipulation may either be a condition or a warranty. Section 12 & 13 (2) of SOGA
draws a clear distinction between a condition and a warranty. Whether a stipulation is a
condition or only a warranty is a matter of substance rather than the form of the words
used. A stipulation may be a condition though called a warranty and vice versa.

Conditions
If the stipulation forms the very basis of the contract or is essential to the main purpose of the
contract. it is a condition. The breach of the condition gives the aggrieved party a right to treat
the contract as repudiated.
 Thus, if the seller fails to fulfill a condition, the buyer may treat the contract as repudiated,
refuse the goods and. if he has already paid for them, and recover the price. He can also
claim damages for the breach of contract.(Section 13 (2) of SOGA).

Warranties
If the stipulation is collateral to the main purpose of the contract, i.e.. is a subsidiary promise,
it is a warranty. The effect of a breach of a warranty is that the aggrieved party cannot
repudiate the contract but can only claim damages. Thus, if the seller does not fulfil a
warranty. the buyer must accept the goods and claim damages for breach of warranty.
 Section 12 of SOGA states that the stipulation as to time of payment are not to be deemed
conditions (and hence not to be of the essence of a contract of sale) unless such an
intention appears from the contract. Whether any other stipulation as to time (e.g., time of
delivery) is the essence of the contract or not depends on the terms of the contract.

Circumstances where a condition may be treated as warranty

In some cases a condition sinks or descends to the level of a warranty. The first two cases
depend upon the will of the buyer but the third is compulsory and acts as estoppel against
him.
a. A condition will become a warranty where the buyer waives the condition, or
b. A condition will sink to the level of a warranty where the buyer treats the breach of
condition as a breach of warranty; or 83
c. Where the contract is indivisible and the buyer has accepted the goods or part thereof.
the breach of condition can only be treated as breach of warranty: The buyer can only
claim damages and cannot reject the goods or treat the contract as repudiated.
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 d. Sometimes the seller may be excused by law from fulfilling any condition or warranty
and the buyer will not then have a remedy in damages (See Section 13 (1)-(4) of
SOGA).

CATEGORIES OF CONDITIONS/WARRANTIES
Conditions and warranties may be express or implied.

a. Express conditions
Express conditions and warranties are which, are expressly provided in the contract.

b. Implied conditions and warranties are those which are implied by law or custom; these
shall prevail in a contract of sale unless the parties agree to the contrary.
 Even where no definite representations have been made, the law implies certain
representations as having been made which may be warranties or conditions. An express
warranty or condition does not negative an implied warranty or condition unless
inconsistent therewith.

There are two implied warranties:

Implied Warranties (Section 14(b) and (c)) Implied warranties are those which the law
presumes to have been incorporated in the contract of sale despite of the fact that the parties
have not expressly included them in a contract of sale. Subject to the contract to the contrary,
the following are the implied

a. Implied warranty of quiet possession: If the circumstances of the contract are such as
there is an implied warranty that the buyer shall have and enjoy quiet possession of the
goods.
b. Implied warranty against encumbrances: There is a further warranty that the goods
are not subject to any right in favor of a third-party, or the buyer's possession shall not
be disturbed by reason of the existence of encumbrances.
 This means that if the buyer is required to, and does discharge the amount of the
encumbrance, there is breach of warranty, and he is entitled to claim damages from the
seller.

Implied Conditions (Sections 14(a),) and Proviso 16(a), and Proviso 16(b). Different implied
conditions apply under different types of contracts of sale of goods, such as sale by
description, or sale by sample, or sale by description as well as sample. The condition, as to
title to goods applies to all types of contracts, subject to that there is apparently no other
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 Implied Conditions as to Title
 There is an implied condition that the seller, in an actual sale, has the right to sell the
goods, and, in an agreement to sell, he will have to it when property is to pass. As a result,
if the title of the seller turns out to be defective, the buyer is entitled to reject the goods
and can recover the full price paid by him.
 In Rowland v. Divali (1923) 2 K.B., 'A' had bought a second hand motor car from 'B' and
paid for it. After he had used it for six months, he was deprived of it because the seller had
no title to it. It was held that 'A' could recover the full price from 'B' even though he had
used the car for six months, as the consideration had totally failed.

Implied conditions under a sale by description

In a sale by description there are the following implied conditions:

a. Goods must correspond with description: Under Section 15, when there is a sale of
goods by description, there is an implied condition that the goods shall correspond with
description.
 In a sale by description, the buyer relies for his information on the description of the
goods given by the seller, e.g. in the contract or in the preliminary negotiations.
 Where 'A' buys goods which he has not seen, it must be sale by description, e.g.,
where he buys a 'new Fiat car' from 'B' and the car is not new, he can reject the car.
Even if the buyer has seen the goods, the goods must be in accordance with the
description (See the case of Beale v. Taylor (1967) All E.R. 253 & Mussa Mahaba v
Rukia Shamte [1979] LRT 6).

b. Goods must also be of merchantable quality: If they are bought by description from
dealer of goods of that description. [Section 16 (b)].
 Merchantable quality, means that the goods must be such as would be acceptable to
a reasonable person, having regard to prevailing conditions. They are not
merchantable if they have defects which make them unfit for ordinary use, or are such
that a reasonable person knowing of their condition would not buy them.
 'P' bought black yarn from' '0' and, when delivered, found it damaged by the white
ants. The condition of merchantability was broken.
 But, if the buyer has examined the goods, there is no implied condition as regards
defects which such examination ought to have revealed. If, however, examination by
the buyer does not reveal the defect, and he approves and accepts the goods, but
when put to work, the goods are found to be defective, there is a breach of condition of
merchantable quality.
 The buyer is given a right to examine the goods before accepting them. But a mere
opportunity without an actual examination, however, cursory, would not suffice to 85
deprive him of this right.

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c. Condition as to wholesomeness: The provisions, (i.e., eatables) supplied must not only
answer the description, but they must also be merchantable and wholesome or sound. 'F'
bought milk from 'A' and the milk contained typhoid. germs. 'F's wife became infected and
died. 'A' was liable for damages. Again, 'C' bought a bun at 'M's bakery, and broke one of
his teeth by biting on a stone present in the bun. 'M' was held liable.

d. Condition as to fitness for a particular purpose: Ordinarily, in a contract of sale,

there is no implied warranty or condition as to the quality of fitness for any particular purpose
of goods supplied. (See section 16 (c) of SOGA).
 But there is an implied condition that the goods are reasonably fit for the purpose for
which they are required if: (i) the buyer expressly or impliedly makes known the intended
purpose, so as to show that he relies on the seller's skill and judgement, and (ii) the goods
are of a description which it is in the course of the seller's business to supply (whether he
be the manufacturer or not). There is no such condition if the goods are bought under a
patent or trade name.

Implied Condition as to sale by sample (Section 17 of SOGA)

(a) There is an implied condition that the bulk shall correspond with the sample in quality;
(b) There is another implied condition that the buyer shall have a reasonable opportunity of
comparing the bulk with the sample; (c) it is further an implied condition of merchantability, as
regards latent or hidden defects in the goods which would not be apparent on reasonable
examination of the sample.

 In a sale by sample as well as by description, the goods supplied must correspond

both with the samples as well as with the description. Thus, in Nichol v. Godis (1854) 158
E.R. 426, there was a sale of "foreign refined rape-oil having warranty only equal to
sample". The oil tendered was the same as the sample, but it was not "foreign refined
rape-oil" having a mixture of it and other oil. It was held that the seller was liable, and the
buyer could refuse to accept.

THE DOCTRINE OF CAVEAT EMPTOR

The term caveat emptor is a Latin word which means "let the buyer beware". This principle
states that it is for the buyer to satisfy himself that the goods which he is purchasing are of the
quality which he requires. If he buys goods for a particular purpose, he must satisfy himself
that they are fit for that purpose.
 Section 16 of SOGA provides that "subject to the provisions of this Act and of any other
law for the time being in force, there is no implied warranty or condition as to the quality or
86
fitness for any particular purpose of goods supplied under a contract of sale".
 In simple words, it is not the seller's duty to give to the buyer the goods which are fit for a

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suitable purpose of the buyer. If he makes a wrong selection, he cannot blame the seller if the
goods turn out to be defective or do not serve his purpose.
 The principle was applied in the case of Ward v. Hobbs. (1878) 4 A.C. 13, where certain
pigs were sold by auction and no warranty was given by seller in respect of any fault or
error of description. The buyer paid the price for healthy pigs. But they were ill and all but
one died of typhoid fever. They also infected some of the buyer's own pigs. It was held
that there was no implied condition or warranty that the pigs were of good health. It was
the buyer's duty to satisfy himself regarding the health of the pigs.

EXCEPTIONS TO THE DOCTRINE OF CAVEAT EMPTOR:

a. Where the seller makes a false representation and the buyer relies on it
b. When the seller actively conceals a defect in the goods which is not visible on a
reasonable examination of the same.
c. When the buyer, relying upon the skill and judgment of the seller, has expressly or
impliedly communicated to him the purpose for which the goods are required.
d. Where goods are bought by description from a seller who deals in goods of that
description.

NB: Caveat Venditor is a Latin term which means let the seller beware. The person selling
goods is accountable for providing information about the goods to the seller. It is a counter to
caveat emptor and suggests that sellers can also be deceived in a market transaction. This
forces the seller to take responsibility for the product and discourages sellers from selling
products of unreasonable quality.

Passing of Property or Transfer of Ownership (Sections 18-22)

The sole purpose of a sale is the transfer of ownership of goods from the seller to the buyer. It
is important to know the precise moment of time at which the property in the goods passes
from the seller to the buyer for the following reasons:

a. The general rule is that risk follows the ownership, whether the delivery has been made
or not. If the goods are lost or damaged by accident or otherwise, then, subject to certain
exceptions, the loss falls on the owner of the goods at the time they are lost or damaged.
b. When there is a danger of the goods being damaged by the action of third parties it is
generally the owner who can take action.
c. The rights of third parties may depend upon the passing of the property if the buyer
resells the goods to a third-party, the third-party will only obtain a good title if the property 87
in the goods has passed to the buyer before or at the time of the resale. Similarly, if the
seller, in breach of his contract with the buyer, attempts to sell the goods to a third party
in the goods, has not passed to the buyer, e.g., where there is only an agreement to sell.
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d. In case of insolvency of either the seller or the buyer, it is necessary to know whether the
goods can be taken over by the official assignee or the official receiver. It will depend
upon whether the property in the goods was with the party adjudged insolvent.
 Thus in this context, ownership and possession are two distinct concepts and these two
can at times remain separately with two different persons.

Passing of property in specific goods

 In a sale of specific or ascertained goods, the property passes to the buyer as and when
the parties intended to pass. The intention must be gathered from the terms of the
contract, the conduct of the parties, and the circumstances of the case.
 Unless a contrary intention appears, the following rules are applicable for ascertaining the
intention of the parties:

RULES OF TRANSFER PROPERTY BETWEEN SELLER & BUYER

 In a contract of sale the transfer of property in goods i.e. ownership has to be ascertained
so as to know at what time the property in goods passes to the buyer. The ascertainment
to know as to when ownership is transferred is of paramount importance as it answers the
following questions as far as property is concerned; that at whose risk the goods are at a
given moment, who can pass a good title by resale/ other dealings with the goods and to
whom the goods belong in the event of bankruptcy of the buyer before the payment of the
price.
 The general rule as far as the above proposition is that: unless otherwise agreed, the
goods remains at seller’s risk until the property therein is transferred to the buyer,
whereupon the goods are at the buyer’s risk whether delivery has been made or not. In
that regard therefore the ascertainment as to the transfer of ownership has been dealt with
by the rules provided under section 20 of Cap 214.

Thus, transfer of property between seller and buyer is regulated by four basic RULES,
i.e. Rule I-IV. The Rules are set out in S. 20 (a) (b) (c) (d) of Cap 214.

RULE 1: (a) Where there is an unconditional contract for the sale of specific goods in a
deliverable state, the property passes to the buyer when the contract is made.
 Deliverable state means such a state that the buyer would be bound to take delivery of
the goods. The fact that the time of delivery or the time of payment is postponed does
not prevent the property from passing at once. (Section 20 (a) )
 This rule entails that where the goods in a deliverable state are identified and
ascertained by the buyer and the transaction is unconditional the property in goods
passes to the buyer as was stated in the case of SADRU H SAID C/O SIDI V R31 . In
this case where the 31[1980] TLR 265appellant sold the car to the complainant and after 88
the payment of the price was completed the motor vehicle remained at the premises of
the seller who in turn shifted the motor vehicle to the other place.

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  The court held that The appellant was liable on theft against section 265 of the penal
code as the property in goods has passed to the buyer pursuant to section 20 rule I of
Cap 214 that in a contract of unconditional sale of specific goods in a deliverable state
the property in goods passes to the buyer at the time when the contract is made.

RULE II: (b) Where there is a contract for the sale of specific goods not in a deliverable state,
i.e., the seller has to do something to the goods to put them in a deliverable state, the
property does not pass until that thing is done and the buyer has notice of it. (Section 20
(b)).

Illustrations: A certain quantity of oil was brought. The oil was to be filled into casks by the
seller and then taken away by the buyer. Some casks were filled in the presence of buyer but,
before the remained could be filled, a fire broke out and the entire quantity of oil has
destroyed, Held, the buyer must bear the loss of the oil which was put into the casks (i.e., put
in deliverable state) and. the seller must bear the loss of the remainder (Rugg v. Minett
(1809) 11 East ~10).
 In the case of CARLOS FEDERSPIEL& COSA V CHARLES TWIGG & CO LTD the court
held that where the risk is still on the seller this may be evidence that the property has not
passed. Blackburn J, in the case of ALLISON V. BRISTOL MARINE INS. CO LTD stated
that an obligation to insure placed upon one party by the contract is also an indication that
he bears the risk and it has been said that this is an indication that he also has the
property.

RULE III: (c) Where there is a sale of specific goods. in a deliverable state, but the seller is
bound to weigh, measure, test or do something with reference to the goods for the purpose of
ascertaining the -price, the property to the goods for the purpose of ascertaining the price,
does not pass until that thing is done and the buyer has notice of it. (Section 20 (c))

 This can be illustrated IN LORD ELDON V HEDLEY BROS34 where sold the haystacks
for delivery at buyer’s convenience and the price was paid at once though liable to
adjustment when the hay was weighed on delivery. Then it was held that the property
passed at once.
 Moreover, it is probable that goods/ property would be held to have passed if the goods
have been delivered, although the seller has still to do something to ascertain the price;
for instance by looking up the list price in a catalogue. In NANKA BRUCE V COMMON
WEALTH TRUST LTD where A sold cocoa to B at an agreed price per 60lb, it being
arranged that B would resell the goods and the cocoa would then be weighed in order to
ascertain the total amount due from A to B. It was held that the weighing did not make the
contract conditional and that the property passed to B before the price was ascertained. 89

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RULE IV: The fourth rule to ascertain intention of the parties when property passes to the
buyer is provided for under section 20 rule IV of Cap 214. This rule deals with a different type
of transaction altogether, although it is very similar to a conditional sale and may become a
sale in due course36. It stipulates: "When goods are delivered to the buyer on approval or ‘on
sale or return’ or other similar terms, the property therein passes to the buyer –
a. when he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
b. if he does not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if a time has been fixed for the return of the
goods, on the expiration of such time if no time has been fixed, on the expiration of a
reasonable time; and what is reasonable time is a question of fact."
 On signification of acceptance to the seller, the buyer cannot repudiate the contract of sale
and reject the goods on the ground that there was breach of contract. This is well
illustrated in the case of MUSA MAHABA V. RUKIA SHAMTE . In the case, the
respondent offered to sell the appellant a Singer Sewing Machine. The appellant accepted
the offer and price were agreed.
 The appellant paid half price with an agreement that the rest be paid by monthly
installment, and the appellant receives the machine on the same date and took it to his
home. The respondent left her home for two months and to that time, the appellant had
not paid the first installment.
 On demand, the appellant refuse to pay asserting that it was not of a singer make and that
it was not in proper working order and he demanded the refund of his half price and to the
respondent to collect her sewing machine.
 The respondent rejected the repudiation of the contract and referred the matter to the
court.
 The court held, inter alia, that the right to repudiate a contract and reject the goods on the
ground of breach of contract cannot be exercised after the buyer has accepted the goods.
The court also held and explain that a buyer is deemed to have accepted the goods when
intimates to the seller that he has accepted the goods or retains them without indicating
that he has rejected them, or does any act which is inconsistent with the ownership of the
seller. (Justice Samatta ( as he then was).
 Likewise, under the rule, the buyer will have his intention implied when he signifies his
approval or acceptance to the seller or does any other act adopting the transaction. The
case of KIRKHAM V. ATTENBOROUGH38 gives illustration. In the case, a jewellery was
sent by A to B "on sale or return". B pledged the jewellery with C. It was held that the
pledge was an act adopting the transaction, so that the property passed to B, and C was
entitled to retain the jewellery.

90

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 TRANSFER OF TITLES
THE MAXIM NEMO DAT QUOD NON HABET
The law starts from the policy of property protection expressed in the Latin nemo dat quod
non habet. The maxim simply means “no one can give or transfer what he does not have.” It
further insists that no one can pass a better title than what he has. The principle is embodied
in the provision of section 23 of Law of sales of Goods Act, which is to the effect that where
goods are sold by a non-owner and in fact without the original owner
permission, the bonafide purchaser acquire no better title than the seller had unless and
otherwise the owner is precluded from denying the sellers authority to sell the property.
 It should be noted, that the seller may not be always the owner of the goods, sometimes
he may have stolen them. Likewise, he may believe he is the owner when in fact he has
been misled by the previous seller, and his buyer gets no better title than he has, then
the goods are to be returned to the true owner and the buyer can then recover damages
from the seller .
 The above position is affirmed in the case of Rowland v Divall42 , where the claimant,
a car dealer, bought a car from the defendant for £334. He painted the car and put it in
his showroom and sold it to a customer for £400. Two months later the car was
impounded by the police as it had been stolen. It was then returned to the original
owner. It was therefore held that the defendant did not have the right to sell the goods
as he did not obtain good title from the thief. Ownership remained with the original
owner. The defendant had 2 months use of the car which he did not have to pay for and
the claimant was not entitled to any compensation for the work carried out on the car.
 As Lord Denning in Bishopsgate Motor Finance Corporation Ltd v Transport Brakes
Ltd , stated that ‘in the development of our law, two principles have striven for mastery.
The first is the protection of property: no one can give a better title than he himself
possesses. The second is for the protection of commercial transactions: the person who
takes in good faith and for value without notice should get better title. The first principle
has held sway for a long time, but it has been modified by the common law itself and by
statute so to meet the needs of our times.’ This quote is important since it establishes
two important principles. On the one hand, the need to protect the proprietary right of the
original owner since he had better title to the good than anyone else. On the other hand
the need to protect commercial transactions because the buyer takes the goods in good
faith for the value offered to him. English Law seems to state that the general rule is in
line with the protection of the original buyer’s rights, the law has developed several
exceptions to this rule which includes but not limited to the followings:-

Estoppel, The exception of estoppel is used when the owner of the goods is refrained from
the denying the seller’s authority as his conduct makes it appear to the buyer that the seller
has the owner’s consent to sell the goods. Thus, the title of the property of the goods will be 91
transferred to the buyer should he buy the goods. This exception is well enunciated in the
case of Eastern Distributers Ltd v Goldring .

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 The second exception is the sale by a mercantile agent. This exception is stated in
section 27 of the Sale of Goods Act46. Any sale by the mercantile agent made in the
normal course of business is valid as long as the agent had the consent by the owner of
the goods which he has possession of. The sale is valid as though the agent had been
expressly given the authority by the owner. But, the buyer must have acted in good faith
and no notice expressing that the seller was not authorized was obtained at the time of the
contract. The same was explained In the case of Folkes v King .
 The next exception to the rule is sale under a voidable title. This exception is provided
under section 25 of the sales of Goods Act, goods obtained by the seller was under a
voidable contract when the consent of the original owner is caused by elements under
section 15 or 16 of Contracts Act. An example to explain this would be when A took the
goods from B by coercion and sold it to C who bought it in good faith. The title of the
property of the goods will be transferred to C.
 Another exception to the rule is the sale by a seller in possession after sale. The
provision that expresses this is section of 27 of the law of Sales of Goods Act50. This
provision means that should the seller sell the goods that was bought by a previous buyer
but is still in the seller’s possession to a second buyer, the second buyer will obtain a good
title to the goods he bought from the seller in good faith. The first buyer will lose his title on
the goods but he is entitled to sue the seller who would be liable to him.
 Other prominent exception to the aforesaid rule includes Sale by one of several joint
owners who is in possession of goods by permission of the co-owners; here the
buyer in good faith gets good title to the goods. Market overt-Open market, where when
goods are sold under an open market recognised by the law, the bonafide purcheser
obtains a better title as per Section 24 of the law of sales of Goods Act, And lastly Sale by
unpaid seller who exercises his right to lien, or stoppage in transit to resell the goods as
stipulated under section 40-49 of the Law of sales of Goods Act .
 Generally, despite the fact that the rule need to protect the proprietary right of the original
owner since he had better title to the good than anyone else but on the other hand the
need to protect commercial transactions because the buyer takes the goods in good faith
for the value offered to him, however the first principle has held sway for a long time, but it
has been modified by the common law itself and by statute so as to meet the needs of our
own times.

PERFORMANCE OF A CONTRACT OF SALE (S. 29-39 of SOGA)

 It is the duty of the seller and buyer that the contract is performed. The duty of the sellers
is to deliver the goods and that of the buyer to accept the goods and pay for them in
accordance with the contract of sale.
Unless otherwise agreed, payment of the price and the delivery of the goods and concurrent
conditions, i.e., they both take place at the same time as in a cash sale over a shop counter54 92
.,

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 DELIVERY (Sections 31-39 of SOGA)
Delivery is the voluntary transfer of possession from one person to another. Delivery may be
actual, constructive or symbolic.
a. Actual or physical delivery takes place where the goods are handed over by the
seller to the buyer or his agent authorized to take possession of the goods.
b. Constructive delivery takes place when the person in possession of the goods
acknowledges that he holds the goods on behalf of and at the disposal of the buyer.
For example, where the seller, after having sold the goods, may hold them as Bailee
for the buyer, there is constructive delivery.
c. Symbolic delivery is made by indicating or giving a symbol. Here the goods
themselves are not delivered. But the "means of obtaining possession" of goods is
delivered, e.g. by delivering the key of the warehouse where the goods are stored, bill
of lading which will entitle the holder to receive the goods on the arrival of the ship.

RULES AS TO DELIVERY (S. 31-36 of SOGA).

The following rules apply regarding delivery of goods:

a. Delivery should have the effect of putting the buyer in possession.

b. The seller must deliver the goods according to the contract.
c. The seller is to deliver the goods when the buyer applies for delivery; it is the duty of
the buyer to claim delivery.
d. Where the goods at the time of the sale are in the possession of a third person, there
will be delivery only when that person acknowledges to the buyer that he holds the
goods on his behalf.
e. The seller should tender delivery so that the buyer can take the goods. It is no duty of
the seller to send or carry the goods to the buyer unless the contract so provides. But
the goods must be in a deliverable state at the time of delivery or tender of delivery. If
by the contract the seller is bound to send the goods to the buyer, but no time is fixed,
the seller is bound to send them within a reas9nable time.
f. The place of delivery is usually stated in the contract. Where it is so stated, the goods
must be delivered at the specified place during working hours on a working day.
Where no place is mentioned, the goods are to be delivered at a place at which they
happen to be at the time of the contract. of sale and if not then in existence they are to
be delivered at the price they are produced.
g. The seller has to bear the cost of delivery unless the contract otherwise provides.
While the cost of obtaining delivery is said to be of the buyer, the cost of the putting
the goods into deliverable state must be borne by the seller. In other words. in the
absence of an agreement to the contrary, the expenses of and incidental to making
delivery of the goods must be borne by the seller, the expenses of and incidental to 93
receiving delivery must be borne by the buyer.

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 h. If the goods are to be delivered at a place other than where they are, the risk of
deterioration in transit will, unless otherwise agreed, be borne by the buyer. (i) Unless
otherwise agreed, the buyer is not bound to accept delivery in instalments.

Acceptance of Goods by the Buyer (S. 37 of SOGA).

 Acceptance of the goods by the buyer takes place when the buyer: (a) intimates to the
seller that he has accepted the goods; or (b) retains the goods, after the lapse of a
reasonable time without intimating to the seller that he has rejected them; or (c) does any
act on the goods which is inconsistent with the ownership of the seller, e.g., pledges or
resells. If the seller sends the buyer a larger or smaller quantity of goods than ordered, the
buyer may: (a) reject the whole; or (b) accept the whole; or (c) accept the quantity be
ordered and reject the rest
 If the seller delivers, with the goods ordered goods of a wrong description, the buyer may
accept the goods ordered and reject the rest, or reject the whole.
 Where the buyer rightly rejects the goods, he is not bound to return the rejected goods to
the seller. It is sufficient if he intimates to seller that he refuses to accept them. In that
case, the seller has to remove them.

Installment Deliveries
 When there is a contract for the sale of goods to be delivered in stated installments which
are to be separately paid for, and either the buyer or the seller commits a breach of
contract, it depends on the terms of the contract whether the breach is a repudiation of the
whole contract or a severable breach merely giving right to claim for damages.

Suits for Breach of Contract

 Were the property in the goods has passed to the buyer, the seller may sue him for the
price.
 Where the price is payable on a certain day regardless of delivery, the seller may sue for
the price, if it is not paid on that day, although the property in the goods has not passed.
 Where the buyer wrongfully neglects or refuses to accept the goods and pay for them, the
seller may sue the buyer for damages for non-acceptance.
 Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the
buyer may sue him for damages for non-delivery.
 Where there is a breach of warranty or where the buyer elects or is compelled to treat the
breach of condition as a breach of warranty, the buyer cannot reject the goods. He can set
breach of warranty in extinction or diminution of the price payable by him and if loss
suffered by him is more than the price he may sue for the damages.
 If the buyer has paid the price and the goods are not delivered, the buyer can sue the
seller for the recovery of the amount paid. In appropriate cases the buyer can also get an 94
order from the Court that the specific goods ought to be delivered.

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 Anticipatory Breach
 Where either party to a contract of sale repudiates the contract before the date of
 delivery, the other party may, either treat the contract as still subsisting and wait till the
date of delivery, or he may treat the contract as rescinded and sue for damages for the
breach.
 In case the contract is treated as still subsisting it would be for the benefit of both the
parties and the party who had originally repudiated will not be deprived of: (a) his right of
performance on the due date in spite of his prior repudiation or (b) his rights to set up any
defense for non-performance which might have actually arisen after the date of the prior
repudiation.

Measure of Damages
 The Act does not specifically provide for rules as regards the measure of damages except
stating that nothing in the Act shall affect the right of the seller or the buyer to recover
interest or special damages in any case were by law they are entitled to the same. The
inference is that the rules laid down in Section 73 of the Cap 345 will apply.

RIGHTS OF UNPAID SELLER

In a contract for the sale of goods, both the buyer and seller have respective duties which
they are bound to undertake. The seller has a duty to deliver the goods which form the
subject matter of the contract while the buyer is under a duty to accept and pay consideration
for the goods.
 None performs of these duties gives rise to specific remedies which the injured party is
entitled to. However, we shall focus on the rights of the unpaid seller.
 Section 40 of SOGA is to the effect that the seller of goods is deemed to be unpaid seller:
a. When the whole of the price has not been paid or tendered; or (b) When a conditional
payment was made by a bill of exchange or other negotiable instrument, and the
instrument has been dishonored.
 For one to have qualified as an unpaid seller; the buyer must have defaulted in making full
payments as per the terms of the contract and where conditional payment is used; for
instance, the bill of exchange or other types of negotiable instruments they must have
been dishonored.
 The unpaid seller has two classes of rights open to him that is the right against the
goods and rights against the buyer.

RIGHTS AGAINST THE GOODS (S. 40-49 of SOGA)

 Where property in the goods has passed to the buyer, the unpaid seller who has not given
up possession of the goods may retain them as lien until the buyer pays his debt. But in
an instance where he gave up possessions to a seller undergoing insolvency, the unpaid 95
seller has a right of stopping the goods in transit. A right of resale may be available
but it has to be carried out as per the law. Where property in the goods has not been

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 transferred to the buyer, the unpaid seller in addition to his other rights is entitled to
withhold delivery which is similar to his right of lien and conduct a stoppage in transit.

a. The right of Lien (S. 42-44 of SOGA)

A seller has a right to hold goods as lien in the following cases; where the contract of sale did
not stipulate payment on credit terms, or where the goods where sold on credit but the terms
related to the credit sale have expired or where the buyer has become insolvent .
 Therefore a seller who is unpaid can exercise this right regardless of his position as an
agent, bailee or custodier of the buyer as long as he is in possession of the goods57 in a
case where the seller has made part delivery of the goods, he is entitled to retain the
undelivered goods as lien as long as he made no agreement to waive the lien or his right
of retention.
 The sellers right of lien can however be lost where; he has been lawful possession of
the goods by the buyer or his agents, where the seller himself decides to waive it or where
goods have been delivered to a carrier, bailee or custodier so that they can be transferred
to the buyer , without reserving the right of disposal of the goods .
 It is important to note that the unpaid seller with a right of retention does not lose his lien
or right of retention merely because he has obtained judgment or decree for the price of
the goods.

b. Stoppage in Transit ( S. 45-47 of SOGA)

 A seller who finds himself in a situation where the buyer has become insolvent but his
dues have not been paid and is no longer in possession of the goods; has a right of
stopping the goods where they are in the course of transit and retaining them until
payment has been made .
 Goods are said to be in the course of transit; Where they have been delivered to the
carrier, bailee or custodiers for purposes of transmission to the buyer or where the buyer
rejects the goods but the carrier, bailee or custodian remains in possession of the goods
 The transit comes to an end in situations where the goods arrive at the appointed
destination and the carrier informs the seller or his agents about it .
 The case of Dixon v Baldwell makes it clear that a transit comes to an end at the point
where the goods have arrived at their destination and the carrier is awaiting orders from
the seller, this goes hand in hand with Section 46 (6) where the carrier or bailee wrongly
refuses to deliver the goods to the seller or his agents.
 When the goods are delivered to a ship chartered by the buyer, it is a question,
depending on the circumstances of the particular case, whether they are in the
possession of the master as a carrier, or as agent to the buyer .
 This right of stoppage is exercised by taking actual possession of the goods and if the
goods are in the course of transit, the seller can issue a notice of his claim to the carrier 96
bailee or custodier who is in possession of the goods .
 Where possible, the seller can direct his notice to the principle at a reasonable time, so
that he can inform his servants not to deliver to the buyer.
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Effect of issuing the notice
After the notice has been given to the carrier who is in possession of the goods, redelivery of
the goods must take place as per the seller’s direction and the expenses incurred are to be
met by the seller65. But where his notice was ignored by the carrier or the buyer as indicated
in Verchure’s Creameries v Hull and Neither lands SS Co, he can sue either sue the buyer
or the carrier but not both.

c. Resale by the Buyer or seller (S. 48-49)

The unpaid seller right of lien, stoppage in transit or lien is not affected by the buyers decision
to carry out a sale or dispose off the goods in any way unless, he assents to it.
 However, there is an exception to this general rule, especially where the documents of
title has been lawfully transferred to the seller who in turn, carries out a resale to a third
party.
 The title of such a party defeats the sellers rights as long as it is acquired in good faith
and a valuable consideration is paid. This is affirmed by the decision in Cahn v Pocketts
Bristol Channel Steam Co where it was stated that, the right of stoppage in transit is
lost where the document of title relating to the goods has been sent to the buyer who
endorses it to a third party, such a party acquires such a title as long as it’s done in good
faith and a valuable consideration is paid.
 Where the transfer of the title is done by other means of a pledge or other disposition of
value, the unpaid sellers rights of lien, stoppage and transit can only be exercised subject
to the rights of the transferee.
 It is important to note that the unpaid seller right of lien, stoppage or retention which he
chooses to exercise, does not rescind the contract of sale unless he decides to exercise
his right to resell after the buyer defaults in making payment, In such a case their contract
is rescinded and the unpaid seller can sue for damages without prejudice to any claim he
may have for damage and in R v Ward v Bignall (1967) it was noted that where the
seller obtains more money than the original amount stated in the contract, he is entitled to
retain all the proceeds.
 Where the unpaid seller opts not to reserve his right of resale, the new buyer acquires
title against the original buyer and where the unpaid seller deals in perishable products
and he issues a notice to be buyer within a reasonable time to make payments and buyer
doesn’t respond, he can go ahead and sell his goods and later on, sue the original buyer
for damages incurred as a result of his breach.

RIGHTS AGAINST THE BUYER

REMEDIES AVAILABLE FOR BREACH (Remedies of the seller).
 Where property in the goods has been transferred to the buyer, who neglects to carry out 97
his duty of payment as per their contract, the seller may maintain an action against him
for the price of the goods. In an instance where the buyer defaults in making payment

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 and property in the goods has not passed neither has delivery, the seller can still claim
for the price.
 Where the buyer wrongfully refuses to accept and pay for the goods which are subject to
the contract, the seller can maintain an action against him for damages for non
acceptance

AUCTION SALES
 Auction sale refers as a method of sale in which parties are invited to make competing
offers (bids) to purchase an item. The auctioneer, who acts as the agent of the seller until
fall of the hammer, announces completion of the sale in favor of the highest bidder by
striking his desk with a hammer (or in any other customary manner).
 Auction sale is sale open to the general public and conducted by an auctioneer. An
auctioneer is the person empowered to conduct such a sale, at which property is sold to
the highest bidder. An auction sale is a sale at which a person acts as an agent for the
seller who is called auctioneer.
 Auction sale is governed by The Sale of Goods Act70 as provided under section 59 (1) (b)
of the Act that “a sale by auction is complete when the auctioneer announces its
completion by the fall of the hammer or in other customary manner, and until such
announcement is made any bidder may retract his bid”.

Rights of auctioneers.
 Auctioneer has the right not to hold auction on the date of advisement. Auctioneer is
not bound to hold auction on the date of advertisement, as his advertisement is not an
offer but a mere invitation to treaty. As provided in the case of Payne v Cave, which
stands for the proposition that an auctioneer's request for bids is not an offer but an
invitation to treat.
 Auctioneer has the right to reserve the price. It is usual for the auctioneer to notify a
reserve price. Reserve price is the lowest price below which the auctioneer will not sell.
This reserve price is fixed by the auctioneer to protect him from the goods selling at
extremely low price. Where the sale is notified subject to reserve price, the buyer is bound
by the reserve price even if the auctioneer by mistake accepted a bid lower than the
reserve price.
 This is as provided under Section 59 (1) (d) of The sales of Goods Act, provides that, a
sale by auction may be notified to be subject to a reserved or upset price, and a right to
bid may also be reserved expressly by or on behalf of the seller.
 The auctioneer has the right to make auction subject to any condition he likes. The
terms of particular auction may import a right to the seller to accept any bid whether it is
the highest or not. A condition in auction sale absolving the seller from liability for any Mis
description as to quality or quantity, so long as it does not go to the root of the transaction 98
would preclude the purchaser from claiming damages.
 In the case of Coffee Board v. Famous Coffee and Tea Work , there was a conditional
auction sale of coffee “the seller does not bind himself to accept the highest bid or any bid,
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 he is not bound to assign any reason for his decision and his decision shall be final and
conclusive”. It was held that the condition clearly imported a right in the seller to accept
any bid, be it the highest one or lower one.

Auctioneer has the right to hold a good and normal contractual rule.
 Thus the auctioneer expressly announces that biddings once made cannot be
withdrawn, therefore revocation of an offer before acceptance.
 As stated in the case of Payne v Cave75 , it was held that the defendant was not
bound to purchase the goods. His bid amounted to an offer which he was entitled to
withdraw at any time before the auctioneer signified acceptance by knocking down the
hammer.

Auctioneer has the right to notify the use of pretended bidding.

In auction sale, the auctioneer has to notify the use of pretended bids for raising the price at
an auction. Even when there is with reserve or subject to any upset price only the seller or in
his absence one person acting on his behalf
 That any person has right to bid on behalf of the seller, but such sale should be
announced rather notified.

As stipulated under section 59(1) (c) as “where a sale by auction is not notified to be subject
to a right to bid on behalf of the seller, it shall not be lawful for the seller himself to bid or to
employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from
the seller or any such person; any sale contravening this rule may be treated as fraudulent by
the buyer”. Therefore, any sale contravening this rule would be treated as fraudulent by the
buyer.

Obligations of the auctioneer.

Auctioneer warrants his authority to sell. It is very clear that in an auction sale the whole
process is finalized by falling down the harmer or any other agreed method and that as soon
as that thing is done then such become the complete contract which bids parties to that
auction sale and therefore in that circumstance the auctioneer is warranted his authority to
sell.
Though he has the right to reserve the price, his failure to doing the same make him
obliged to sale. In the case of Barry v Davies where the auctioneer withdrew goods
from an auction (the good has no reserve price) when a bonafide bid of 200 pounds
was effected, it was ruled that, if the auction is advertised as being without a reserve
price, then the auctioneer is bound to sell to the highest bidder and cannot withdraw
the sale simply because the price is low.
99
Auctioneer warrants giving quiet and peaceful possession of goods against payment
of the price. In auction sale, where the goods are at deliverable state, then in such case the
contract is complete, at the moment when the bid is accepted. In such sale the property
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passes immediately to the bidder and the auctioneer is warranted to give possession of such
good to the person happened to be the highest bidder subject to the payment of agreed price.

RIGHTS OF THE BIDDERS.

a. The bidder has the right to retract his bid. The bid is an offer and if the bid is not
accepted it would not be an agreement to sell and therefore the bidder may retract his bid.

As provide under section 59(1) (b) of the sale of Goods Act79 that “a sale by auction is
complete when the auctioneer announces its completion by the fall of the hammer or in other
customary manner, and until such announcement is made any bidder may retract his bid”.

 A bidder has the option to withdraw his bid before the acceptance of bid, therefore his
security amount cannot be forfeited, but if he does so after the fall of hammer, it amounts
to breach of contract and his security may be forfeited.

b. The bidder has right to receive the delivery of the goods. The main reason for a
bidder to involve in an auction sale is to make sure that at the end of the day such
property in goods is passing to him exclusively. It is the right of the bidder that whenever
he happened to be the highest bidder in an auction sale, subject to the mode used to
finalize the trade, such property is delivered to him.

c. Right to sue for specific performance of the contract.

The bidder is also protected by the law in the circumstance that an auctioneer is not ready to
perform his contractual obligation. In that circumstance a bidder is entitled with the right to
sue for the specific performance when it happen that he will otherwise affected and that any
other remedies are not proper to him.

d. Right to sue seller for damage for the breach of warranty. Apart from right to sue for
the specific performance, a bidder has also the right to sue whenever an auctioneer has
breached any warrant in that auction and that it caused damage on the part of bidder.

Obligations of the bidder.

a. The bidder has a duty to pay for the goods in accordance with terms of contract.
In any auction sale, a bidder is making an offer which is required to be accepted by the
auctioneer by falling down the harmer or any other means so agreed or as the custom of
the that business. Therefore if it happens that, he as bidder has not retract his bid before
acceptance then it is his obligation to pay the price which he proposed.
The bidder has also the obligation to accept the conditions prescribed by the
auctioneer. 100
 It is the well known right of the auctioneer to make some conditions which must be fulfilled
in an auction sale and that in other side it is the obligation of the bidder to accept the
same.
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 For instance if the auction is subjected by the auctioneer to the reserved price or any other
conditions then it is the obligation of the bidder to accept the same as it is the right of the
auctioneer so provided by the law.

Dynamics in auction sale

 In auction sale in terms of rights and obligations of auctioneer and the bidders there are
dynamics which occur due to different situations,
 In auction sale the seller may reserve the right to bid. Where the seller reserves such right
then the seller or any person on behalf of him can bid, in this situation the right of the
seller should be expressly reserved but the seller himself does not have the right to bid at
the auction and the seller also cannot employ any person to bid on his behalf but the
dynamic of this point is if the auctioneer intentionally take a bid from the seller or from his
agent it is not proper but Section 59(1) (d) that any person has right to bid on behalf of the
seller in a situation that sale should be announced rather notified.
 The seller has the obligation to accept the highest bid, but in dynamics he has right to
refuse to knock down the goods to the highest bidder as in Warlow V Harison , under the
Act the auctioneer has the right to make the auctioned conditional as in Coffee Board V
Famous Coffee and Tea works81 ; there was conditional auction sale of coffee`` the seller
does not bind himself to accept the highest bid or any bid, he is not bound to assign any
reason for his decision and his decision shall be final and conclusive’’.
 In auction sale the auctioneer has the obligation not to bid against each other but if they
bid by different items it is known as the `ring’ then it is allowed as we can see in the case
of M Lachin Setty and sons Ltd V Coffee Board82 .

NB: A ‘knock out’ agreement between the intending buyers not to bid against each other is
not illegal. See. Lanchman Dass & Others V. Sita Ram & Others (1975) A.I.R Delhi, 159.
Restrictions; The auctioneer cannot sell the goods on credit. Also he can not be compelled to
accept a cheque for the purchase price.

Rights & Duties between Buyer & Seller

a. S.29 Cap 214-the duty of seller to deliver goods and of the buyer to accept and pay the
price
b. S.36 (1) of Cap 214-buyer’s right to examine the goods before he/she takes delivery.
c. S. 36 (2) of Cap 214-seller’s duty to afford the buyer, on request, a reasonable
opportunity of examining the goods.
d. S.38 of Cap 214, buyer is not bound to return rejected goods to the seller.

TRADING CONTRACTS INVOLVING RAIL OR SEA TRANSIT 101

 In the case of a contract for the sale of goods which are to be shipped by sea a number
of conditions are attached by the parties or by custom and practice of merchants. Some
of the important types of such contracts are given below:
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a. F.O.B (Free on Board): Under an F.O.B. contract, it is the duty of the seller to put the
goods on board a ship at his own expenses. The property in goods passes to the buyer
only after the goods have been put on board the ship, usually named by the buyer.
 The seller must notify the buyer immediately that the goods have been delivered on
board, so that the buyer may insure them. If he fails to do so the goods shall be deemed
to be at seller's risk during such sea transit.
b. F.O.R. (Free on Rail): Similar position prevails in these contracts as in the case of F.O.B
contracts.
c. C .I.F. or C.F.I. (Cost insurance and freight): A CIF contract is a contract for the sale of
insured goods lost or not lost to be implemented by transfer of proper documents.
 In such types of contracts, the seller not only bears all the expenses of put the goods on
board the ship as in an F.O.B. contract but also to bear the freight and insurance
charges. He will arrange for an insurance of the goods for the benefit of the buyer. On the
tender of documents, the buyer is required to pay and then take delivery. He has a right
to reject the goods if they are not according to the contract.

d. Ex-Ship: Here the seller is bound to arrange the shipment of the goods to the port of
destination, and to such further inland destination as the buyer may stipulate. The buyer is
not bound to pay until the goods are ready for unloading from the ship and all freight
charges paid. The goods travel at the seller's risk but he is not bound to insure them.

EXAMPLE OF SALE AGREEMENT

SALE AGREEMENT
This Agreement is made this 8th day of January 2022

BETWEEN

MRS. HILDA MMOTA of P.O. BOX 149, MBEYA (hereinafter referred to as “the VENDOR”)
of one part

AND
MR.NASSOR MOHAMED MANSOOR of P.O. BOX 662, MBEYA (hereinafter referred to as
“the PURCHASER) of the other part

102
WHEREAS, the Vendor is desirous of selling and the purchaser is desirous of purchasing the
property in consideration of a total sum of Tanzania Shillings Three Million and eight hundred

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thousand only (Tshs 3,800,000/=) (hereinafter referred to as “the Contractual Price), to be
paid in one installment immediately after signing this agreement.
WHEREFORE the Agreement provides further that: -
1. The vendor shall sell and the purchaser shall purchase the said property without any
legal burden.
2. The Vendor shall surrender all legal documents relating to the ownership of the said
vehicle to the purchaser upon receipt of the Contractual Price.
3. The parties that in the event of default by either party the affected party shall be
entitled to compensation and/or purchase price as the case may be an any other costs
accruing thereby hereby expressly declare it.
4. If for any other lawful reason this contact is rescinded, the purchaser shall immediately
give up such property and recover the contractual price.

IN WITNESS WHEREOF the parties hereto have caused this agreement to be signed this
________ day of ________________________ 2007

For and on behalf of the Vendor:

1. Name : __________________________________
Qualification: _____________________________
Postal Address: ___________________________
Signature: ________________________________
2. Name: ___________________________________
Qualification: _____________________________
Postal Address: ____________________________
For and on behalf of the Purchaser:
1. Name: __________________________________
Qualification: _____________________________
103
Postal Address: ___________________________
Signature: ________________________________

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 2. Name: ___________________________________
Qualification: _____________________________
Postal Address: ____________________________
Signature: ________________________________

BEFORE ME:
Name: __________________________________
Designation: _____________________________
Postal Address: __________________________
Signature: _______________________________

104

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 GENERAL PRINCIPLES OF COMMERCIAL CONTRACT
SYNOPSIS
1. Definitions: Commerce & Commercial Contracts
2. Categories of Commercial Contracts
3. Legal regimes governing commercial contract
4. The general principles of commercial contract
5. Conclusions

Definitions of concepts
Commerce, is the exchange of goods and services, especially on a large scale involving
transportation between cities, states, and nations(Black’s Law Dict.8 th Edn. P. 807)
 Or is the exchange of goods, services or something of value, between businesses or
entities
 Or is the activity of buying and selling, especially on a large scale.
Commercial Contract
Commercial contract refers to a legally binding agreement between parties in which they are
obligated to do or restrain from doing particular things
Categories of Commercial Contracts
 International commercial contracts- between nationals of different states, or cross
border contracts-involving more than one nation
 Domestic Commercial Contracts-within a state and between nationals of the same
state.
Legal regimes governing commercial contracts
 UNIDROIT Principles of International Commercial Contracts,1994
 United Nations Convention on Contracts for the International Sale of Goods
 INCOTERMS 2020
 UNCITRAL Model Law on Electronic Commerce, 1996
 United Nations Convention on the Use of Electronic Communications in International
Contracts, 2005
 The Law of Contract Act, Cap. 345 R.E 2002 The Electronic Transactions Act, 2015
105
General Principles
Various principles governs commercial contracts. Broadly they are categorized in terms of:-

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  Formation
 Content
 Expiration/Exit
 Remedies
Formation
Essentials for a valid and enforceable Commercial Contract are: (section 10 of the LCA)
 Offer and Acceptance
 Intention to create legal relationship
 Capacity
 Consent (free)
 Consideration
 Legal/Lawful Object
Offer and Acceptance
An Offer: One’s (offeror) expression of readiness to contract on specified terms, intending to
be binding once accepted by the other party (offeree)
 Can be express or implied (conduct) Can be made to an individual, specific group or
the World at large
 For there to be an offer, an intention to be bound by the same if accepted must be
established.
 HENCE: An invitation to treat is established
 See the case of Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256
Contents
Generally, the primary contents of any contract are terms and conditions. These are
categorized as;- 1. Express terms/conditions
 Written
 Oral
 Collateral
 Set out and agreed by parties
 Cannot be varied-the parole evidence rule
Implied terms/conditions -By Law -By fact -By customs and trade usage
Expiration/end/exit 106
Generally, a contract can be brought to an end through four primary ways namely
a. Expiration
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 b. Termination –(due to Breach(actual or anticipatory) i.e. failure/refusal to perform,
defective performance or self-incapacitation; via repudiation, impossibility or inability to
perform.
c. Vitiation (due to Misrepresentation or Mistake)
d. Frustration
NOTE: ON VITIATION
a. Misrepresentation: A false statement of fact, which, though not a term, is made with
intent to induce another to contract. It must be a statement of fact, not an opinion or
law
 Silence does not amount to misrepresentation, but one must tell the whole
truth-not only part of it
 It can be Fraudulent, Negligent or Innocent
 Remedies in case of misrepresentation includes Rescission, Indemnity and
Damages
b. Mistake
Generally classified into the following:
 Common Mistake-Both parties making same mistake on a fundamental fact-
e.g. On existence of the subject matter-the contract is void
 Unilateral Mistake(if relates to terms-then the contract is void
 Mutual mistake-both understand each other parties cannot
 Mistake as to quality of the subject matter-

c. Illegality
Generally, A contract may otherwise be valid with all elements but unenforceable due to
illegalities either at the time of formation or during performance. The illegalities may be due
to:
a. Illegal mode of performance
b. Illegality of Purpose
c. Violation of legal rules and public policy
d. Breach of legislation
Remedies/Damages
Remedies are the options available to make good for the breach of the contract
 Damages are essentially compensation for the loss suffered due to breach of a 107
contract.

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Essential factors to consider for determining damages includes
a. Actual loss having ensued
b. It is a compensable loss
c. Causation-the loss is not too remote
Some common remedies
 Specific performance
 Compensation
 Restitution
 Injunction
Conclusion
 The principles that governs commercial contracts are universal in terms of formation,
performance and enforcement.
 However, legal regimes varies depending with the nature of the transaction, location of
the transaction, Parties to the transaction as well as the Modality of transaction.

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 LAW OF AGENCY
AGENCY- Is a business or organization providing a particular service on behalf of another
business, person, or group.
AGENT- Is a person who acts on behalf of another, in particular:
PRINCIPAL- Is the most important or senior person in an organization or group.

Who can be a Principal?

Any person who has the legal capacity (meaning that they are not insane, or in certain
circumstances a minor) to perform an act may be a principal and empower an agent to carry
out that act. Persons, corporations, partnerships, not-for-profit organizations, and government
agencies may all be principals and appoint agents.

"Agent" and "principal “defined in Law of contract Act

Section 134 of the law of contract Act, define an "agent" is a person employed to do any
act for another or to represent another in dealings with third persons and the person for whom
such act is done, or who is so represented, is called the "principal"

Who may employ agent

Section 135 of the law of contract Act, provide that “Any person who is of the age of
majority according to the law to which he is subject, and who is of sound mind, may employ
an agent.

Who may be an agent

Section 136. As between the principal and third persons any person may become an agent;
but no person who is not of the age of majority and of sound mind can become an agent, so
as to be responsible to his principal according to the provisions of this Act.

What is the purpose of this relationship (called “Agency”)? 109

A contract to be made by an agent on behalf of a principal is considered to be the contract of

the principal and not that of the agent. It allows the principal to authorize somebody to carry
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out her duties, either for a specific purpose (i.e., purchasing a house) or generally (i.e., to
conduct many transactions). The agency relationship is usually entered into by informal
agreement, but also can occur by formal agreement (in certain cases, the agency relationship
must be specified in writing). The acts must be legal (i.e., principal cannot hire agent to kill the
professor).

What is the basis of the Agency relationship?

Inherent in the Principal-Agent (P-A) relationship is the understanding that the agent will act
for and on behalf of the principal. The agent assumes an obligation of loyalty to the principal
that she will follow the principal’s instructions and will neither intentionally nor negligently act
improperly in the performance of the act. An agent cannot take personal advantage of the
business opportunities the agency position uncovers. A principal, in turn, reposes trust and
confidence in the agent. These obligations bring forth a fiduciary relationship of trust and
confidence between P and A.

What are the obligations of the Agent to the Principal?

1. An agent must obey reasonable instructions given by the P.
2. The A must not do acts that have not been expressly or impliedly authorized by the P.
3. The A must use reasonable care and skill in performing the duties.
4. Most importantly, the A must be loyal to the P.
5. The A must refrain from putting herself in a position that would ordinarily encourage a
conflict between the agent’s own interests and those of the principal.
6. The A must keep the P informed as to all facts that materially affect the agency
relationship.

What are the obligations of the Principal to Agent?

1. Compensation
The principal's first duty to the agent is compensation. This means the principal must
compensate the agent as agreed. Keep in mind that a principal hires an agent, similar to an 110
employer employing an employee.

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The principal must therefore pay the agent a reasonable fee. The fee doesn't have to be
money, but it has to be something that is of value to the agent, such as stock shares or
tangible goods. The reasonableness of the fee is judged according to the facts and
circumstances of the agency relationship and agreement.
2. Indemnification
Is to protect against damage, loss, or injury. The principal's second duty to the agent is
indemnification. This means the principal must reimburse the agent for any claims, liabilities,
and expenses incurred while performing agency duties. The principal must indemnify the
agent for duties performed under the principal's authority and also for duties performed in the
reasonable furtherance of agency duties.
3. Fair Dealing and good faith
The principal's third duty to the agent is that of good faith and fair dealing. This means the
principal must deal with the agent fairly and honestly. The principal cannot engage in conduct
that reasonably might result in harm or loss to the agent. In meeting this end, the principal
must specifically provide the agent with safe working conditions and information about
potential risks and losses.
4. Acting according to Contractual Duties
These duties are analogues of many of the agent’s duties that we have just examined. In
brief, a principal has a duty “to refrain from unreasonably interfering with [an agent’s]
work.”Restatement (Second) of Agency, Section 434. The principal is allowed, however, to
compete with the agent unless the agreement specifically prohibits it. The principal has a duty
to inform his agent of risks of physical harm or pecuniary loss that inhere in the agent’s
performance of assigned tasks.

TERMINATION OF AGENCY
1.By agreement
On the basis that an agency relationship is created by agreement between the principal and
the agent, such a relationship can also be brought to an end by mutual agreement between
the parties, either in writing or orally. The following situations may arise in this contex;-
 If the agreement provides for the appointment of the agent for a specified period of
time, the agency will come to an end automatically when that period of time expires 111
 If the agreement provides for the agency to terminate upon the occurrence of a
specified event, the agency will come to an end upon the happening of the specified
event.
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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2. By operation of law
An agency may terminate by operation of law upon the occurrence of the following events:
 Where the party concerned is an individual: i. death; ii. Insanity; or iii. bankruptcy
 Where the party concerned is a limited company: i. winding-up; or ii. Receivership.
 Frustration of the contract of agency
3. By act of the parties
An agency may be terminated by the acts of either the principal or the agent, as illustrated
below:
 Performance by the agent - If an agent is appointed to accomplish a particular task
or for a specific purpose, when the task is accomplished by the agent or the specific
purpose is attained, the agency will terminate.
 Revocation by principal - The authority of an agent may be revoked at any time by
the principal. However, unilateral revocation otherwise than in accordance with the
provisions of the agency agreement may render the principal liable to the agent for
breach of the agency agreement. Revocation of the agent's power by the principal
may not automatically discharge the principal from liability to a third party, Therefore,
notice of revocation of an agent's power should be given to the third party as soon as
possible.
 Renunciation by agent - An agent is entitled to renounce his power by refusing to
act or by notifying the principal that he will not act for the principal. Unilateral
termination of the agency by the agent before he has fulfilled his obligations to the
principal under the agency agreement will render the agent liable to the principal for
breach of the agency agreement, such as payment of damages for loss suffered by
the principal.
 By notice - If the agency agreement provides that the agency may be terminated
upon either party serving on the other written notice of a specified duration, for
example, three months' written notice, either party may terminate the agency
agreement by serving the required notice on the other party. However, if the agency
agreement does not contain any termination provision, the general rule is that
reasonable notice has to be given to the other party to terminate the agency.

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WINDING UP OF COMPANIES (PART VIII OF CO. ACT)
Winding up of a company is the process that indicates the legal Procedures through which
the company comes to an end.
 The term winding up a company means a process whereby all the assets of the
company are realized and used to pay off the liability of the company.
The difference between Winding-Up a Company and Liquidation
 Winding up a company: This deals with ending business affairs and terminating
company obligations before liquidation.
 Liquidation: This deals with the sale of the company's assets once it has closed .

Modes of Winding up (Section 267 (1) & (2))

There are two modes of Winding up of the company which are The Compulsory or court
winding up and Voluntary winding up
A.COMPULSORY/ COURT WIND UP (Section 275 of Co. Act)
 This is the winding up that take place by the order of the court to wind up has been
issued
 A petition has to be filled to the High Court as it is the only court that has jurisdiction
(Section 275). Section 281 provide for petition for winding up
Court with jurisdiction to wind up company in Tanzania
 The court which has jurisdiction to wind up any company Registered in Tanzania is the
High Court of the United Republic of Tanzania. (Section 275)
 The High Court has power to transfer Proceedings to the Resident Magistrates Court.
Upon such power is transferred the Residents magistrate court shall have the same
power as the High Court
Document required to file to the HC for winding up
 An application to the court for the winding up of a company shall be by way of
Petition. Section 281
Example 113
IN THE HIGH COURT OF TANZANIA
(COMMERCIAL DIVISION)
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 AT PAR ES SALAAM
WINDING UP CAUSE NO. 4 OF 2021
IN THE MATTER OF THE COMPANIES ACT (CAP 212 R.E.2019)
AND
N THE MATTER OF PETITION FOR WINDING UP OF MINISO TANZANIA COMPANY
LIMITED………………….. PETITIONER
Grounds for Winding up by the court (Section 279 (1) )
The court will only allow the petition upon prove of the following grounds
 Where the company has passed a special resolution that the company be wound up
by court.
 Where the company does not commence it’s business within one year of its
incorporation or where it suspends business for the whole year
 Where it’s member fall below two. Section 26
 Where the company fail to pay it’s debt. Section 280
 Where the court is of the opinion that it’s just and equitable to wind up the company
 Where the whole objects of the company is fraudulent
Who has right to petition for winding up of company (Section 281(1) of the company
Act
 The company
 Any creditors of the company
 Administrator
 Any contributory. This means any person liable to contribute to the assets of the
company in the event of its being wound up include holders of its fully paid up shares
Note; a contributory shall not be entitled to present a winding up petition unless (Section 281
(1) of the company Act.
c. Either the number of members is reduced below two
d. The shares in respect of which he is a contributory, or some of them, either were originally
allotted to him and registered in his name for at least six months during the eighteen
months before the commencement of winding up.
Power of the court on hearing petition (Section 282 (1) )
114
 Dismiss with or without cost
 Adjourn the hearing conditionally or unconditional
 Make interim order as it deems necessary or fit
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  Make an order of Winding up the company
Commencement of winding up by the court (Section 286 (1) )
 The winding up of the company shall deemed to have been commenced at the time of
the passing of the resolution
 Is the date when the court make an order for winding up
 Is the date for petitioning of the resolution
Consequence of winding up order
 The copy of winding up order shall be forwarded to the registrar. Section 287
 The registrar shall make a minute thereof relating to the company
 The order shall act as the notice to discharge all offices of the company and
employees of the company except where the servant were under fixed term and it’s
not yet expired, as such order shall act as wrongful termination
 Where the company has been wound up , no suit or any other legal proceedings shall
commence against the company except by leave of the court
Liquidators
 For the purpose of conducting Proceedings of winding if the company the company
may appoint a liquidator. Section 294
 Liquidator or liquidators are person who shall deal with disposing off and paying the
liability of the court out of the existing assets of the company.
Powers of the liquidators
The liquidators shall have powers as provided under Section 301
a. To bring and defend any action on behalf of the company
b. To carry any business on the behalf of the company so far as beneficial of the
company
c. To pay any class of creditors in full
d. To make compromise or arrangements with creditors or person claiming to be
creditors and all other claims

VOLUNTARY WINDING UP ( Section 333 of Co. Act)

 This is the winding up process that do not have any intervention by the court of law
115
 This can be done by the Members or Creditors of the company. Section 333
Grounds for Voluntary winding up (Section 333 (a) – (c) )

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 a. When the period, if any, fixed for duration of the company by the article of association
expires.
b. If the company resolves by special resolution that the company be wound up
Voluntarily
c. If the company resolves by special Resolution to the effect that it cannot by reason of
its liability continue its business and that it’s advisable to wind up
Categories of Voluntary winding up
Voluntary winding up is divided into two categories i.e Members voluntarily winding up,
Creditors voluntarily winding up and Voluntary winding up under supervision of the
court.

MEMBERS VOLUNTARILY WINDING UP

 This is the winding up process done by members of the company
 Here the members has to pass special Resolution that allow the company to be wound
up
 The resolution need to be advertised in the gazette and newspaper in less than 14
days. Section 334
 In the meeting the directors are expected to issue a declaration of insolvency that the
company will pay debts within 12 months from the commencement of winding up.
Section 338 of the Co. Act
 If the declaration is false all directors will be liable to fine or imprisonment or both.
Section 338(3)
 In the resolution they will appoint the liquidators
Winding up by the Creditors 338(4)
 It take place where the directors after the general meeting has passed to wound up
Voluntarily failed to issue a declaration of solvency .
Procedures for creditors Voluntary winding up ( section 348)
a. The company shall cause the meeting of creditors a next day immediately after the
day of resolution to wind up the company Voluntarily
b. The notice of meetings need to be sent by post to the creditors also the company shall
cause notice of the meeting of creditors to be advertised in the gazette.
116
What should be done in the meeting
 In the meeting the directors of the company shall declare or give a statement of
position of companies affairs
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  The creditors of the company have a right to appoint the Liquidator. Section 349
 Once the liquidator appointed the directors power cease

Voluntary Winding-Up under supervision of the Court

 After a Company has passed a resolution for voluntary winding-up, the Court may
order that the voluntary winding-up shall continue but subject to the supervision of the
Court. The extent of supervision is to be determined by the Court. The Court may give
such liberty to the creditors, contributories or others to apply to the Court as it thinks
just. The Court may also appoint additional liquidator or liquidators and may also
remove any liquidator.
 A liquidator so appointed shall have the same powers, be subject to the same
obligations and in all respects stand in the same position as if he had been appointed
in accordance with the provisions of the Act relating to the appointment of liquidator in
voluntary winding-up, subject , however to any restrictions the Court may impose. An
important effect , however of the order is that the Court gets same powers as it has in
the case of winding-up by the Court.

Commencement of Voluntary winding up

 The winding up by Voluntary approach commence at the time when the resolution has
been passed by members of the company for Voluntary resolution. Section 335
Effects/ consequences of Voluntary winding up. Section 336
 The company ceases to carry on its business
 The board power ceases on the appointment of the liquidator
 It does not necessarily operate as the termination or discharge of employment.

117

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 SUMMARY OF WINDING UP PROCESS IN TANZANIA
S/No PROCEDURE DOCUMENT WHO IS TIME DOCUMENT
NEEDED RESPONSIBLE CONSUMED ATTACHED
IF ANY
1. Passing of a resolution A Resolution MEMBERS OF
that the company be from THE
wound up voluntarily and members of COMPANY
submit it to BRELA the Company (Prepare a
resolution, A
serving director
and a secretary
to sign)
2(a) Director to FORM 338; The directors 30 days FORM 338
write A that they have immediately
Declaration of COPY OF made a full preceding
Solvency DECLARATI inquiry into the the date of
ON affairs of the passing of
OF company and the resolution
SOLVENCY they have to wind up
formed an the company.
opinion that the
company is
able to pay its
debts in full
within the
prescribed
period not
exceeding
twelve months
from the
commencement
of the winding
up
2(b) Deliver to the Registrar A COPY OF I t has to
for registration before DECLARATI contain a
the ON OF statement of
winding up process SOLVENCY the company’s
assets and 118
liabilities as at
the latest
practicable
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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 date before the
making of the
declaration
3(a) Appoint a liquidator at Form 360 A; MEMBERS OF 14 days ATTACHMENT
the general meeting for Notice to THE OF Form
voluntary winding up of appoint a COMPANY 360 A
the company liquidator The Form shall
be submitted to
BRELA
3(b) Publish the resolution for 1.The Notice The copy of the 14 days ATTACHMENT
voluntary winding up in 2. Insert advertisement OF Form
the Gazette or circulating Form 360 B; to be submitted 360 B
newspaper to BRELA
Notice of
Appointment
of Liquidator:
Voluntary
Winding-Up:
for insertion
in Gazette
4(a) The Liquidator calls LI QUI DATOR
upon creditors of the
company
for settlement of their
claims against the
company
4(b) The Liquidator issues a LI QUI DATOR 30 days
notice for a general
meeting at least 30 days
before specifying the
time, place and purpose
of the meeting(The
purpose of the meeting
is for determination of an
account of winding up
report from the
liquidator)
5. The notice has to be A NOTICE LI QUI DATOR A SAMPLE OF
published in the Gazette The notice has AN ACCOUNT 119
and a circulating to be published
newspaper in Tanzania. in the Gazette

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 and a
circulating
newspaper in
Tanzania. The
purpose of the
meeting is for
determination
of an account
of winding up
report from the
liquidator.
6. The Liquidator submits RETURN
to the members an AND
account of the winding ACCOUNT
up, showing how the
winding up has been
conducted and disposal
of the assets of the
company
7. The Liquidator, within 14 1. FORM LIQUIDATOR 14 days FORM 345
days after the general 345;
meeting, submits to the RETURN
Registrar a copy of an AND
account for winding up ACCOUNT
and minutes of the COPY
meeting which
deliberated on the 2.MI NUTES
liquidator’s winding up OF THE
report. MEETI NG
(passed the
liquidators
report)
8. The Registrar on THE LIQUIDATOR 90 days
receiving the account ACCOUNT
and returns from the AND
liquidator on winding up; RETURNS
shall register them and
on expiration of three
months from registration 120
of the same, the
company shall be
deemed to be dissolved.
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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NOTE: BRELA requires that before the winding up process, a company must have a Tax
clearance certificate from TRA and a company financial statement.

REMEMBER TO ATTACH
a. Declaration of Solvency (Form 338) - Members’ Voluntary Winding-Up Declaration
of Solvency Pursuant to Section 338 of The Companies Act 2002
b. Form 3 6 0 A. Notice of Appointment of Liquidator: Voluntary Winding-Up Pursuant To
Section 360 Of The Companies Act 2002
c. Form 3 6 0 B Notice of Appointment of Liquidator: Voluntary Winding-Up: for insertion
in Gazette Pursuant to section 360 of the Companies Act 2002
d. Form 345 Return of Final Meeting in a Members’ Voluntary Winding-Up Pursuant to
section 345 of the Companies Act 2002

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 INSOLVENCY
Insolvency is the state of being unable to pay the money owed, by a person or company, on
time; those in a state of insolvency are said to be insolvent.

There are two forms of insolvency:-

1. Cash-flow insolvency is when a person or company has enough assets to pay what is
owed, but does not have the appropriate form of payment.
2. Balance-sheet insolvency is when a person or company does not have enough
assets to pay all of their debts. The person or company might enter bankruptcy, but not
necessarily. Once a loss is accepted by all parties, negotiation is often able to resolve
the situation without bankruptcy.

INSOLVENCY PROCEDURE

It can be a civil and even a criminal offence for directors to allow a company to continue to
trade whilst insolvent. However, two insolvency procedures are introduced in the Company
Act which aim to provide time for the rescue of a company or, at least, its business.

These are Administration and Company Voluntary Arrangement:-

1. Administration is a procedure to protect a company from its creditors in order for it to

be able to make significant operational changes or restructuring so that it could
continue as a going concern, or at least in order to achieve a better outcome for
creditors than via liquidation. In the Tanzania an Administrator is appointed who must
be a licensed Insolvency Practitioner to manage the company's affairs to protect the
creditors of the insolvent company and balance their respective interests. Unless the
company itself is saved by this process, the company is subsequently put into
liquidation to distribute the remaining funds. 122

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 2. A Company Voluntary Arrangement is a legal agreement between the company and
its creditors, based on paying a fixed amount lower than the outstanding actual debt.
These are normally based on a monthly payment, and at the end of the agreed term the
remaining debt is written-off. The CVA is managed by a Supervisor who must be a
licensed Insolvency Practitioner. If the CVA fails, the company is usually put into
liquidation.

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 COMMERCIAL DISPUTES RESOLUTION IN TANZANIA:
Introduction
Commercial Dispute Resolution
Commercial Dispute resolution system comprises of both Judicial and quasi-judicial (formal
and informal) systems
a. Formal systems is comprised of Courts of law including District, RM, High Court and
the CAT.

The court system structures in commercial dispute are

 The Court of Appeal of Tanzania. Is the Highest court
 The High Court of Tanzania. Which comprises the commercial Court, Labor
court and Land Court
 The Resident Magistrate court
 The District Court
 The Primary court

b. Quasi-judicial (Informal) systems is comprised of Tribunals including the Tax

Appeals Tribunals, the PPAA, the Fair competition Tribunal and the Fair Competition
Commission and recently established Tanzania Insurance Ombudsman
Common approach/methods is adversarial system which is litigious in nature.
 However, some of the informal systems including the Formal systems employ
Alternative Dispute Resolution mechanisms for example the Tanzania Insurance
Ombudsman as well as the Court-annexed mediations through the Courts of law.
SYSTEMS OF DISPUTE RESOLUTION
Commercial Litigation: the Practice and Procedure
a. Introduction to the High Court-Commercial Division and Commercial Litigation
b. Setting the Litigation machinery/process in motion- getting Started
c. Pre-action protocols and Incidental matters
d. Alternative Commercial Dispute Resolution- in the Commercial Court-Some salient
features
e. Other Important features of the Commercial Court- operational
124
2.1.1. Introduction to the High Court-Commercial Division and Commercial Litigation

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The High court of Tanzania Commercial Division commonly the “Commercial Court” is one of
the three divisions of the High Court of Tanzania.
 Main registry is located at Kivukoni front with two sub registries in Arusha and
Mwanza.
 Established in 1999 (under the then High Court Registries Rules, 1999
Objective for its establishment:
 Dispensing commercial justice effectively, speedily, and efficiently in order to enhance
conducive environment for investment.
Pecuniary Jurisdiction:
 It resolves Commercial cases i.e. cases with commercial significance. Formerly, it was
limited to 70 &100 million for immovable and movable property respectively.
 It does not enjoy exclusive jurisdiction over commercial cases (O.IV Rule 4 CPC)
Applicable Laws
 The Civil Procedure Code, Cap. 33 R.E 2019( in case of lacunae)
 The High Court (Commercial Division) Procedure Rules, 2012(GN.250/2012)-
principal rules and The High Court(Commercial Division) Procedure(Amendment)
Rules, GN.107 of 2019
 The High Court of Tanzania(Commercial Division Fees Rules (GN.249/2012)
 All substantive Commercial laws including but not limited to the following
a. The companies Act and Rules made there under
b. The Arbitration Act, 2020
c. The Contract Act, [Cap,345 R.E 2019]
d. The Insurance Act,2009.
e. The Carriage of Goods by Sea Act, [Cap. 164, R.E 2002]
f. The Evidence Act, Cap.6.R.E. 2022
Who can access the Court
a. Litigants: The Court is accessible to all persons either Tanzanians or foreigners provided
that the case is of commercial significance.
b. Legal practitioners/advocates: In terms of Order III Rule 2A, no advocate is allowed to
appear in the commercial court unless he is certified by the council of continuing legal
education or is allowed by the Judge in charge of the commercial division.
 Practically no advocate has ever been denied access and practice in the court for 125
want of such certificate.
 However, it takes only advocates who are competent in Commercial litigation to
access and litigate successfully
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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Factors to consider before selecting the Commercial Court
A. a Litigant- all he/she needs is right information and right guidance
B. For a Legal Practitioner/Advocate-
Factors to consider before you decide to institute a case in the Commercial Court
a. Competence (the Advocate, the Suit/subject matter, the Court and the Litigant)

The Advocate: In terms of the said CPC, one need to be certified by either council of
continuing legal education or J/Inch to practice in the court through not strictly
observed.
 However, one need to be competent in both substantive and procedural corporate and
commercial laws as well as commercial litigation.
 Ensures a comfortable ride throughout the turbulent litigation journey
Suit/subject Matter of the litigation
 It must be a civil case of commercial significance- i.e. that which has a
connection with buying and selling of goods or service (see Rule 3 and the
cases of G.K Hotels (pty.) vs. Board of Trustees of the LAPF, CC 01/2008, Kibo
Hotel Kilimanjaro vs. Presidential Parastatal Sector Reform Commission
&Another, CC 44/2007).
 It must be within the prescribed time limit in terms of Cap.89 R.E 2002
The Court
 The Court’s competence is determined by its statutory pecuniary, territorial and subject
m
Pecuniary-as noted above
 Territorially-Throughout Tanzania Mainland (excluding Zanzibar)-and nearest
registry.(See the cases of Ahmed Mohamed Siwij vs. NBC Limited& Another, CC
96/2010)
The Litigant
Who is suing who?-the proper and or necessary party
 It assist in determining the proper mode of suing/instituting the suit-the procedural
aspect. E.g. a contracted between a company and an education or religious institution,
a guardian, or a suit between a corporate entity and its shareholders etc.
126

b. Cost
PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA
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 Consider the financial and time aspects of litigating in the commercial court in terms of
Requisite Fees and time to be taken from institution of the suit to finalization i.e.
Judgment delivery.
Fees- Categories and Structure are provided under GN. 249/2012 namely Filing Fees,
Service Fees and Fines

Filing Fees
Payable amount for claims whose subject matter can be monetarily valued is 3% of the
value of the subject matter provided it does not exceed 10 Million(First Schedule of
GN.249/2012) and TZS 3,000,000/- for claims whose subject matter can’t be valued
monetarily or by Originating summons)
 There are also prescribed fees for filing Annexures and other documents
Service Fees
 These are fees payable for various services offered by the Court e.g. Transcription
services, Certification services, Taking Evidence outside the Court ,Translation ,
Attesting signatures etc. Fines
c. Time lines for actions-you must be a good time manager because time is of essence in
commercial litigation
Setting the Litigation machinery/process in motion getting Started Modes of Instituting
a Suit;
 By way of a Plaint or Originating summons-depending on the nature of the Claim.
 Originating summons is a statement that initiates a case where parties agree on the
facts but disagree on law, provision in a contract or other document and hence require
court’s interpretation. As such it is filed where dispute on fact is unlikely but rather seek
interpretation
opposition of the said statement and it must, inter alia, contain statement of questions to
be answered by the Court and concise description of relief sought therefrom. See Rules
10-11
Pleadings, other incidental documents and special considerations.
A Pleading is a document drafted and filed in Court for the purpose of litigation or
communication i.e. Statement of claim and answers (Plaints, Petitions, Affidavits, WSDs,
Replies, Rejoinders etc.)
a. Format of Pleadings and other documents to be filed in the commercial court 127
 The accepted format of the pleading to be filed in the Commercial court is 12”
font size, Times New Roman, 1.5’ line space

PRACTICAL ASPECT OF COMMERCIAL LAW IN TANZANIA

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  The purpose of format is to enhance clarity and good order in pleadings and
save time in administration of commercial justice (see the Exim Bank (T) vs.
Kobil (T) Limited, CC 35/2013)

b. Failure to comply with format requirement

 May lead to rejection of the Plaint (Rule 19(2) and Ernest Nduta Nyororo vs. NBC
Limited &Another, CC 01/2015). Note:
 NOTE: However, the Court has noted that failure to observe this requirement does
not in any way prejudice the other party and as such it does not go to the root of
the matter-See Kobil supra)
Other Incidental Documents
a. Skeleton Arguments
 Summary presentation of arguments (with supporting authorities if any) to be made
during the oral hearing (Rule 64, Denis Michael Msafiri vs. Acaste Corporation
Limited, Misc. 4/2014 and Eco bank Tanzania Ltd vs. Multisol Mauritius Ltd
Misc.276/2016)
 They are supposed to be filed within 3 days before the date of hearing.
 Failure to file skeleton arguments cannot be a reason for adjournment and neither
are skeleton arguments equal to written submissions.
 Hence appearance for oral hearing is mandatory regardless the filing of Skeleton
arguments (see MPS Oil Tanzania Ltd&2Others vs. Citibank Tanzania Ltd,
Misc.248/2014)
 No extension of time can be granted to file skeleton arguments
 They help to save time during oral hearing and enable the counsel to make
submission within the 20 minutes time allocated for oral submissions
b. Witness statement (Rules 47-58)
 A statement of evidence made by a witness under oath or on affirmation in lieu
of oral testimony through examination in chief.
 It is filed in court within 14 days after the Final Pre-trial conference.
 It is filed only where a suit has been commenced by way of a plaint.
 It must make reference to all exhibits intended to be relied upon during the trial.
 Each party has an independent obligation to file and serve the statement to
another party.
 A Witness, after filing the statement, must be procured in Court for cross
examination, or else, the court cannot rely on examination in chief alone. He or 128
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  Failure to file witness statement is tantamount to failure to prosecute the case.
However, failure to prosecute the case does not justify grant of summary
judgment in presence of defense earlier filed.
 As such the court must proceed with trial expert to establish the veracity of the
claim (Puma Energy Tanzania Ltd vs. Spec-Check Enterprises Ltd,
Consolidated Misc.233&252/2014, Barclays Bank Tanzania Ltd. Vs. Tanzania
Pharmaceutical Industries Ltd.&2others,CC 147/2012)
Case filing and admission/registration procedure
 Checking the documents for compliance purposes Assessment of fees payable (by the
assistance of Court clerks or self assessment by use of Information Kiosk)
 Payment of fees-through given bank account and submission of Pay-slips. After
submission of a slip, ERV Receipt will be issued to accompany the documents to be filed
in court
 Admission and Registration (Manually and electronically).
 Files created and the case assigned a number
 Case assignment-tabled before the Judge in Charge for assignment
Appearance to Court-process service
 Initial Notice to the Defendant will be sent upon the case being registered and
assigned a case number. The initial notice require the defendant to respond by filing
the necessary pleadings within the prescribed time.
 Service in the Comcourt is per the Civil Procedure Code-direct or by way of
substituted service
 The rules also recognize E-
it is e- service, proof of the same is vide-copying the sent summons simultaneously to
the Court and procuring a “sent” status report.(Rule 17(2&3)
 Presumption of service can be made where, though the party was not dully served,
he/she enters appearance on the date and time she was required to appear(rule 18)
Pre-trial conference (Rule 28 (1) within 14 days upon completion of pleadings)
 Designed for the purpose of expeditious disposal of case through making necessary
Court directives on how the case, including interim applications should be conducted
including scheduling/filing orders and other incidental pleadings
 Failure to comply with any order made may be adverse to the defaulting party-e.g.
dismissing the suit or striking out the defense or even entering ex parte judgment 129
(rules 28(2),29(5)&31(1) etc.
 Possibility of settlement of the case at pre-trial conference

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Summary Judgment vs. Default Judgment (Rule 68)
Summary Judgment
 Judgment made on the basis of pleadings only. This is where;-
 No prospect of plaintiff’s success
 No prospects of defendant’s successful defense
 No reason of deciding the case on trial-e.g. where defendant admits the claim
 It can be made suo motto by the Court
 NOTE: the deference between Summary Judgment under the CPC and summary
Judgment under the Rules. (See the case of By trade Tanzania Ltd vs. the Board of
Trustees of Tandahimba Farmers Agricultural Input Trust, CC 86/2014 for extensive
discussion and Puma energy(supra)
Default Judgment (Rule 22(1)
 Issued where defense has not been entered within the prescribed time or within the
time extended to do so (ten days)
 There must be proof of service
 A plaintiff must apply for the same through a prescribed form in the schedule to the
rules
 A decree obtained through this procedure cannot be executed unless
 The holder thereof has published it at least in two widely circulating papers within ten
days of its issuance 21 days have lapsed after such publication
 A party failing to so publish within the prescribed time may seek extension of such time
to do so (see Borole Africa Logistics Tanzania Ltd vs. Deus Nyanza t/a MBN Traders,
Misc. 59/2015)
Alternative Commercial Dispute Resolution-
 Mediation
 Arbitration
 Out of Court Settlement
 Request for time to pay
Mediation-Salient features (Rules 33-42)

issues notice of mediation to parties and or their advocates and third party if any
 Parties must have authority to settle or in lieu thereof must have ready means of 130
communication with the person with such authority during mediation session
 Mediator may seek attendance of an expert upon parties agreeing to bear the costs if
any
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  Confidentiality is mandatory
 It must be finalized within 14 days from the date of the first session
 Mediator has no power to extend life span of a case: See First National Bank Tanzania
Limited vs. Wasward Wilson Mapande,CC 75/2014
Arbitration-under the CPC and The Arbitration Act,2020

Agreements(Stay of proceedings)
 Appointment of Arbitrators
 Issuance of Interim Orders (preservation of subject matter)
 Directing and or guiding arbitrators-( by way of Reference, through a petition, before or
during arbitration- existence of question of law, etc.
 Supervising Arbitration process- (setting aside and or remitting an award)
 Enforcing Arbitration Award- procedures- For extensive discussion See the cases of
Symbion Power LLC vs. Salem Construction Limited, Misc.12/2015
Admission and Request for time to pay(rule 25)
 Admit the Claim
 Request via an application for time to pay.
 Application be accompanied with financial status of the defendant
 See the case of MPS Oil Tanzania Ltd&2others vs. Citibank Tanzania Ltd,
Msc.248/2014
Other Important features of the Comcourt incidental to litigation -operational
a. Cutting down of delay avenues vide-
 Introducing life span of a case instead of speed tracks-i.e. 10 Months, not more than
12 months,
 Fines for adjournments, re-institution of mediation or dismissed suit,
 Abolishing briefs holding- through introducing fines where brief holder fails to proceed,
 Introduction of summary judgment and Default judgment,
 Limiting time for mediation and powers accorded to both the Court and Mediators to
control proceedings,
 Introduction of video conferencing and electronic service
Modern ICT Infrastructure i.e.
 Both Visual and audio recording of the proceedings (JAVS and FTR systems) 131
 Information Kiosk-case status, fees calculation etc.
 SMS-Mtandao -case status information via handset/mobile phones
 E-Library
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  The Electronic Register through the JSDS and
 Court Display board/dashboard
COMMERCIAL ARBITRATION SYSTEM
Commercial Arbitration:
A system of assisted disputed resolution by a neutral third party (Arbiter/Arbitrator/Umpire)
whose decision is binding on the parties upon their prior agreement.
 One of earliest forms of ADR which is now widely applicable in commercial dispute
resolution for its relative comparative advantages such as Privacy and finality of the
proceedings as well as Party autonomy
 Currently, it is debatable whether it is still a cost effective system for dispute resolution
compared to other modes or litigation in particular
Categories/Types of Commercial Arbitration
Generally, Arbitration can be either Domestic or international-depending on the parties
involved and the nature of the dispute.
a. Domestic Arbitration: (See section of the Arbitration Act,2020). Denotes arbitration
which takes place within a certain country whereby
 The Subject matter of the dispute and procedure for arbitration are governed by the
laws of that country.
 The Cause of action arose whole or partly in that Country
 The Parties are from the same country.

b. International Commercial Arbitration, Denotes Arbitration whereby one of the

parties reside out of the country or the subject matter of the dispute originates abroad.
 NOTE: Rules and procedures applicable do differ depending on the category/type-
i.e. international or domestic.
Nature-Forum
Generally, the nature of Commercial arbitration is categorized into two depending on the type
of the forum for the proceedings, namely Ad-hoc commercial Arbitration and Institutional
Arbitration.
a. Ad-hoc Arbitration: A form of arbitration where the parties and the arbitrators
independently determine the procedure, without the involvement of an arbitral
132
institution.
 Ad-hoc forum are temporary in nature constituted for the purpose of resolving a
particular dispute.
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  They are composed of Arbitrator(s) according to the parties Agreement

b. Institutional (permanent) Forum

Institutional forum are permanent institutions with infrastructure and systems to
administer disputes.
 Procedures for appointment of arbitrators, composition of the tribunal and the conduct
of proceedings are determined by the institutional Rules.
 Examples includes the following:
 The London Court of International Arbitration
 The International Chamber of Commerce-International Court of Arbitration
 The International Center for Settlement of Investment Disputes (ICSID)
 The Nairobi Center for International Arbitration
 Kigali Center for International Arbitration
 The Tanzania Institute of Arbitrators (Tiarb.)
 The National Construction Council of Tanzania

LEGAL REGIMES
a. Domestic Legal Regime for Commercial Arbitration: Consists of laws and rules that
governing arbitration in Tanzania with particular focus on the procedural aspects,
substance of the disputes as well as enforcement of the arbitral award.
They include the following
 The Arbitration Act, 2020
 The Civil Procedure Act,
 The Insurance Act,2009
International legal regime for commercial arbitration
 These are of two broad categories depending on the nature of the dispute/subject
matter and the parties thereto. i.e. The Convention on the Settlement of Investment
Disputes Between States and Nationals of Other States,1966 (The ICSID
Convention)-governs resolution of international investment disputes between states
and Nationals of other States) The UNCITRAL Model Law on International
Commercial Arbitration and
 The UNCITRAL Arbitration Rules, -governing international commercial disputes 133
(between individuals-nationals of same or different states)

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 NOTE: the former legal regime is applicable subject to the underlying agreement between
States, international laws as well as institutional rules where as for the latter it depends on
the Agreement between the parties-(prior to or post-dispute), international law as well as
the institutional rules.
Common essential aspects on Commercial Arbitration System
a. Arbitration Agreement/ Clauseseverability, in writing)(See article 1(3) of the
UNCITRAL Model Law on International Commercial Arbitration)
b. Arbitral Tribunal (Composition, Powers-e.g. Competenz competenz, ) see further s. 40
of the Arbitration Act,2020
c. Enforcement of Arbitral Agreement-through the Court- e.g. power to stay proceedings
and now power to refer parties to Arbitration upon application) see section 12.
d. Enforcement of Arbitral Award
e. Challenging an Arbitral Award.
NOTE: The common issues identified above are generally matters provided in the Laws
governing Arbitration of a particular jurisdiction, or institution governing arbitration and the
parties’ Agreement.
 Hence it is important to always consider the legal regimes as well as the parties
agreement in relation to arbitration.

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 SELECTED FORUM FOR COMMERCIAL DISPUTE RESOLUTION IN
TANZANIA
Introduction
 Generally, Commercial dispute includes disagreements between two parties which
arises or are connected to trade and commerce transaction.
 Generally, parties to a commercial transaction are at liberty to predetermine how to
resolve their disputes normally through their contracts. However, for some disputes,
such as tax disputes, their resolution is determined by statutes
 In Tanzania, the conventional forum for commercial dispute resolution is the Court of
law. However, there are specialized quasi-judicial forum that deals exclusively though
not generally mandatorily with resolution of commercial disputes.
Insurance Dispute Resolution
Introduction
Generally, insurance Disputes arise when there is a point of disagreement between the
insurer and the insured or beneficiary of the policy, or where an insurer is aggrieved by the
decision of the Commissioner of Insurance.
 In most instances, it will relate to disagreement in relation to either substantive or
procedural aspects of the contract of insurance leading to either repudiation of the
claim, under assessment or delay to process the claim, or any decision relating to the

insurance disputes has always been the Courts from form its lowest level in the
hierarchy.
 In the year 2009, alternative forum namely the Tanzania Insurance Ombudsman and
the Insurance Appeals Tribunal were established to resolve insurance disputes
between consumers and insurers and between the Commissioner of Insurance
and insurance companies respectively.
The Tanzania Insurance Ombudsman Service (TIO)
It is an independent office established under the Insurance Act, 2009 to resolve insurance
disputes that arise between insurance consumers, third parties and the registrant’s business.
Thus it is provided under S.122 of the Insurance Act thus;
 “There is established Insurance Ombudsman Services for the purposes of resolving
135
insurance disputes arising between insurance Consumers and Insurance Registrant’s
business in Tanzania”
 The core objectives of establishing the Service are twofold namely:-
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 a. To resolve insurance disputes in a timely and cost effective manner as an
alternative to normal Court litigation procedures.
b. To protect Insurance Consumers, third parties who are protected by law and
the Insurance industry at large so as to create and enhance public confidence
in the insurance industry
c. The service started its operations in the year 2015 after the appointment of the
Ombudsman. Since then it has been receiving and resolving insurance
complaints from complainant in Tanzania. Currently it is located in Dar es
Salaam at PPF Tower fourth floor and at all six TIRA zones throughout
Tanzania.
How can lodge a complaints to the insurance ombudsman
A complaint may be filed by:-
a. The Complainant in person who may be either a policy holder or a victim of accident
(Third party protected by Law).
b. An heir, beneficiary or legally authorized representative of such complainant
 The complainant must show that he/she is a victim and or a person who is
aggrieved by the Registrant’s decision or position regarding his claim or the
appropriate quantum of compensation.
 As such, there must be an indication either a letter or a communication from the
registrant showing the position which is complained.
 If it is a complaint against delay to process the claim, the same must be
showed through a series of communications made on the part of the
complainant (Section 123 (b) of the Insurance Act).
Categories of disputes which can be filed:
 Disagreement on quantum of indemnification or compensation as the case may be
 Claim repudiation
 Delay to process the claim
 Disagreement on the interpretation of a material term of an insurance Policy
Modes of resolving the dispute
 Reconciliation
 Mediation
 Arbitration
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Jurisdiction

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  Section 124 (1) of the Insurance Act, provide that: “The Ombudsman shall have
powers to grant an award to the Complainant for direct losses and damage suffered by
the complainant up to a maximum of fifteen million”.
 As such the jurisdiction in so far as granting award is concerned; it is the said amount
of fifteen Million.
 For example, such an award can be made in compensation for material inconvenience
or distress or for financial loss suffered by a complainant as a result of error, omission
or maladministration on part of the insurance registrant’s business (including
manifestly unacceptable incompetent service);( Regulation 15(2) of the insurance
Regulation)
Applicable laws
Insurance disputes are resolved in terms of the laws, rules and principles that govern
insurance business including the following:
a. The Insurance Act, No. 10 of 2009
b. The Motor vehicle insurance Act, Cap.169 R.E 2002
c. Law of Contract Act Cap.345 R.E 2002
d. Insurance Ombudsman Regulations –
Compliance with the Ombudsman’s determination/decision or reconciliation/mediation
agreement.
 As shown above, compliance with the determination of the ombudsman, be it an
award, declaratory order, or determination order is mandatory on the part of the
Insurance registrant.
 In terms of regulation 21, a registrant is required to comply therewith within 30 days of

Ombudsman may; give notice to the insurance registrant to comply with such
determination within a period of fourteen days or such further period as the
Ombudsman may determine; and on the failure or refusal by the insurance registrant
to comply with the notice, the Ombudsman shall report such failure or refusal to the
Commissioner.
 Upon reporting of failure or refusal by the insurance registrant to the Commissioner,
the Commissioner of Insurance may: Impose, in addition to the determination made by
the Ombudsman, a penalty for failure or refusal to comply with the determination; or
Cancelation of insurance registrant’s business license, and, in that event, publish in
whatever manner the Commissioner considers to be appropriate, the fact of such 137
termination
The Insurance Appeals Tribunal (S. 126 of Insurance Act )
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The Insurance Appeals Tribunal is an ad hoc forum established under S.126 of the Insurance
Act, 2009 as a redress mechanism for insurance registrants who are aggrieved by the
decision of the Commissioner of Insurance.
 Generally, it deals with specified decisions of the commissioner of insurance-though
the Insurance Act does not specify such decisions. (one of the areas of the subject
matter of appeal would be such as decision of the COI in respect to licensing fit and
proper persons, margins of solvency)
 For specified decision of the COI see for example the Hong Kong Insurance
Companies (Amendment Ordinance) No.2 of 2015 Schedule 9, under section 98-on
specified decision of the COI) e.g. Refusal to approve the appointment of a person as
a director of an authorized insurer , Revocation of approval of appointment of a person
as a director of an authorized insurer ,Imposition of a restriction on effecting or varying
contracts of insurance by an authorized insurer ,Imposition of a requirement on an
authorized insurer about investments ,Imposition of a limitation of the premium income
to be received by an authorized insurer ,Refusal to grant an insurance agency license
Etc.
How does it become operational
As shown above, the tribunal is designed under the law as an ad hoc body.
 Implicitly therefore, it becomes operational only upon existence of a complaint by the
Insurance Registrant.
 Apparently, the law presupposes that the Minister will appoint the tribunal only upon
the existence of the complaint from the Insurance registrant.
Modus Operand
According to section 126 of the Insurance Act and the Insurance Appeals Tribunal
Regulations(GN.412/2013) the following are the steps for operationalization of the Tribunal:
a. The Minister appoints the members and the Chairperson (S.126 (2) and (3)
Remedies to the person aggrieved
 A person aggrieved by the decision of the Commissioner lodges the appeal by petition
to the Tribunal within one month of receipt of such decision (S.126 (4)
 A petition must be in writing and accompanied with the impugned decision within 30
days to a designated person
 A designated person is an officer appointed by the tribunal to receive, determine 138
viability of admission and prepare records of an appeal filed to the tribunal
 The designated officer will determine viability and require the complainant to pay filing
fee of Tshs. 100,000 to the treasury
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  The designated person will present the record of the petition before the Chairperson
 Parties will be afforded opportunity to be heard.
 The tribunal will make a decision within 60 days
 The decision of the tribunal is final and conclusive on matters of facts and evidence,
save for points of law on which the aggrieved party may appeal to the High Court
within 30 days of the decision

TAX DISPUTES RESOLUTION FORUM

Tax Disputes:
A tax dispute arise out of a misunderstanding between the Commissioner General and a Tax
payer arising out of tax assessment.
The disputes may arise due to the following
a. Interpretation of the tax statute giving rise to tax obligation to a tax payer
b. Tax assessment and adjustments
c. Decision by the Commissioner general to enforce the law or compliance by tax payer
e.g. Warrant of Distress (See the case of TRA vs. Tango Transport Co, Civ. App.
No.84/2009)
The Forum:
The forum for resolving tax disputes are mainly four including the following:
a. The Commissioner General of Tax (CG)
b. The Tax Revenue Appeals Board (TRABCG
c. The Tax Revenue Appeals Tribunal (TRAT)
d. The Court of Appeal of Tanzania (CAT)

The Commissioner General. Sections50-52 of the Tax Administration Act,2015)

 According to section 50 of the Tax Administration Act,2015, the Commissioner General
is empowered to make tax decisions affecting a tax payers obligations in maters
related tax
Remedies to the person aggrieved by the decision of commissioner General
139
 A person aggrieved by the that determination can lodge an objection with the
Commissioner General within 30 days of receipt of such tax decision.

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  The commissioner general is supposed to make a decision within receive and
determine objections to tax assessment from aggrieved tax payers.
 Thereafter, the CG has powers to receive submissions from the aggrieved party on the
objections and thereafter make a Decision on Objection.
The Tax Revenue Appeals Board (TRAB)
This is established under section 4(1) of the Tax Appeals Act,Cap.408.
 The Board has sole original jurisdiction in all proceedings of a civil nature in respect of
disputes arising from revenue laws administered by the TRA.
 Thus, in terms of section 53 of the Tax Administration Act, the Board receives all
appeals against the decision on the tax objections made by the Commissioner
General.
 Administratively it is headed by a Secretary who is an appointee of the Minister.
The Tax Revenue Appeals Tribunal (TRAT)
 This is established under section 8(1) of the Tax Appeals Act,Cap.408.
 The Tribunal shall has sole (exclusive) jurisdiction in all appeals arising from
decision of the Board on disputes on which original jurisdiction is conferred on the
Board.
 It also has supervisory powers of the TRAB.
The Court of Appeal of Tanzania (CAT) (Section 25 of the Tax Revenue Appeals Act)
 on matters of la
only.
 NOTE: The choice of the forum for resolving a tax dispute depends on the nature of
the dispute i.e. A tax Objection or an Appeal, and the stage of the disputes, i.e.
Commissioner’s decision or an appeal against the decision.
 For Procedures on making and dealing with Tax objections to the CG see Section 50-
52 of Tax Admin. Act, and S.12 of the Tax Revenue Appeals Act.
 For Appeals procedure generally see Part IV of the Tax Revenue Appeals Act.
Fair Competition Dispute Resolution
Generally, the forum for resolving competition disputes are two namely The Fair Competition
Commission(FCC) and The Fair Competition Tribunal (FCT)
 They are both public institutions established by virtue of SS. 62(1) and 83 (1) of the
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Fair Competition Act, No. 8 of 2003 respectively.

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  The Fair Competition Commission(FCC) deals with promotion and protection of
effective competition in trade and commerce as well as protecting consumers from
unfair and misleading market conduct.
 The Fair Competition Tribunal (FCT) deals with competition and regulatory matters
from Orders and decisions of FCC) ;and
 The sector specific regulatory authorities including Surface and Marine Transport
Regulatory Authority (SUMATRA),Tanzania Communications Regulatory Authority
(TCRA), Energy and Water Utilities Regulatory Authority (EWURA) and Tanzania Civil
Aviation Authority (TCAA).

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QUESTIONS AND ANSWERS GUIDING TO COMMERCIAL DISPUTE
RESOLUTION IN TANZANIA.
1. What are the main dispute resolution methods used in your jurisdiction to settle
large commercial disputes?
 The main dispute resolution methods used to settle large commercial dispute in Tanzania
are litigation and arbitration. Other methods include mediation and reconciliation.
Litigation
The Civil Procedure Code (Cap 33 R.E 2002) (CPC) and the High Court (Commercial
Division) Procedure Rules govern court procedures including preparation of statements,
evidence, trial and appeal.
 The system is broadly adversarial. The applicable standard of proof in commercial cases
is on the balance of probability.
Arbitration
The Arbitration Act (Cap 15 R.E 2002) regulates arbitration procedures (see Questions 30 to
34). The Act was originally enacted in 1931 and was based on the English law at the time.
Court litigation
Limitation periods
1. What limitation periods apply to bringing a claim and what triggers a limitation
period?
The limitation periods are governed by the Limitation Act 1971. Limitation periods vary
depending on the type of claim, for example:
a. Claims to enforce a judgment: 12 years.
b. Claims by or on behalf of the government: 60 years.
c. Breach of contract or trust: six years.
d. Claims for equitable relief with no other prescribed limitation: six years.
e. Claims to recover arrears or trust property: six years.
f. Tort actions: three years.
g. Claims for recovery of land: 12 years.

142
 Claims for which the law does not provide a specific limitation period are time-barred after
six years.
 The limitation period starts running once the cause of action has arisen.
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Court structure
2. What is the structure of the court where large commercial disputes are usually
brought? Are certain types of dispute allocated to particular divisions of this court?
The court system is structured as follows:
a. The Court of Appeal of Tanzania is the highest court.
b. The High Court of Tanzania (High Court), which comprises the:
c. Commercial Court;
d. Labour Court; and
e. Land Division of the High Court.
f. The High Court of Zanzibar, which enjoys jurisdiction over Zanzibar.
g. The Resident Magistrates’ Court.
h. The District Magistrates’ Court.
i. Primary courts

 The Commercial Court hears commercial cases provided the claim value is at least:
TZS70,000 for movable property and TZS100,000 in proceedings for recovery of
immovable property.
 Tribunals and boards under Ministries have exclusive jurisdiction over specific matters.
Examples include the Tax Appeals Board for tax matters and the Competition Tribunal
for matters arising under the Fair Competition Act.
The answers to the following questions relate to procedures that apply in the local courts
generally.
Rights of audience
3. Which types of lawyers have rights of audience to conduct cases in courts where
large commercial disputes are usually brought? What requirements must they
meet? Can foreign lawyers conduct cases in these courts?
Rights of audience/requirements
 A qualified lawyer with a valid practicing certificate has full rights of audience in the
High Court and subordinate courts thereto (save for primary courts).
 Lawyers who are called to the Bar and admitted to the Roll are called advocates and
can also practice as notaries public. Practicing certificates are valid for one year and
must be renewed. A case would be dismissed if it was handled by an advocate with no 143
practicing certificate.

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  Advocates appearing in the Commercial Court must be certified by the Council for
Legal Education as being knowledgeable in commercial law and practice or obtain
permission from a judge of the Commercial Court to appear in a specific case.
Foreign lawyers
 Generally foreign lawyers will not have rights to conduct cases in Tanzanian courts.
However, they can ask for a temporary permit from the Chief Justice to appear in
court.
 Further, if a foreign lawyer is admitted to the Roll and holds a valid practicing
certificate, such individual will enjoy rights of audience before the Tanzanian courts.
Fees and funding
4. What legal fee structures can be used? Are fees fixed by law?
 Advocates generally charge their clients based on hourly rates or enter into fixed fee
arrangements. In relation to the latter, the fee is generally fixed by law at 3% of the
subject matter but can be higher depending on the complexity of the matter.
 Contingency fee agreements are not allowed in Tanzania. If a litigant is unsuccessful,
he must pay his lawyer’s fees, and can expect to be ordered by the court to pay the
successful party’s legal costs

5. How is litigation usually funded? Can third parties fund it? Is insurance available
for litigation costs?
Funding
Parties pay their own legal costs. Depending on the outcome of the litigation, a portion of the
costs may be recovered from the unsuccessful party.
Third party funding is not prohibited by law.
Insurance
Insurance may be available for litigation costs.
Court proceedings
Confidentiality
6. Are court proceedings confidential or public? If public, are the proceedings or any
information kept confidential in certain circumstances?
144
 Proceedings are generally public, and judgments are pronounced in open court. The
court may determine that a hearing concerning arbitration or mediation be held in
private. Matrimonial disputes and cases involving minors are held in private.
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  Parties must disclose information requested by the court, presumably including
confidential documents. The court may, however, determine that documents can be
withheld if they contain commercial secrets or for public interest reasons.
Pre-action conduct
7. Does the court impose any rules on the parties in relation to pre-action conduct? If
yes, are there penalties for failing to comply?

 Parties are expected to follow pre-action protocols to exchange information about the
claim. Parties are encouraged to resolve disputes, if possible out of court.
 The law provides that if the claimant has not notified the defendant of its intention to
sue, and the defendant pays the amount claimed or determined at or before the
hearing, no legal costs will be allowed except on a special order of the judge (see
Question 22).
Main stages
8. What are the main stages of typical court proceedings?
Starting proceedings
 A claim is started by the presentation of a plaint to the court or a designated officer
appointed by the court. Where a claim is against the government, a copy of the plaint
must be delivered to the Attorney-General.
 Cases are registered in the register of civil suits and assigned to a judge or magistrate
within four days. In the Commercial Court, cases are registered in the Commercial
Case Register. A filing fee is payable to the relevant court.
Notice to the defendant and defense
 A summons is issued to the defendant to appear and answer the claim on a date to be
specified in the summons. If the defendant resides in the jurisdiction of the court in
which the claim is brought or has an agent resident in that jurisdiction empowered to
accept service, the court will deliver or send the summons to a proper officer (usually
referred to as a process server) or his subordinate to be served on the defendant or
his agent.
 The proper officer must effect service of the summons by delivering or tendering the
same to the defendant or his agent within 21 days after he has received it. As far as is
practicable, the service must be made to the defendant or his agent, as the case may 145
be, personally.
 A copy of the summons must be delivered to the defendant together with a copy of the
plaint and other relevant documents. The defendant (his agent) must sign in an
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 appropriate place on the summons as evidence that he has been duly served. The
process server must swear on an affidavit stating how and when he duly effected
service on the defendant (his agent). Such affidavit constitutes sufficient evidence of
service.
 Court proceedings begin within 21 days after evidence of service has been received
by the court.
 Where the defendant is believed to reside outside Tanzania (and not in Kenya,
Uganda, Malawi or Zambia) and has no known agent in Tanzania empowered to
accept service, the court may, on the application of the claimant, order that service of
the summons be effected either:
a. By post, by the claimant or his agent.
 Through the courts of the country in which the defendant is believed to reside.
 Where the defendant is believed to reside in Kenya, Uganda, Malawi or Zambia
and has no known agent in Tanzania empowered to accept service, the
summons can be served:
 By post, by the claimant or his agent, where the claimant has provided the
postal address of the defendant. Leave of court is required.
 In any other case, through the courts of the country in which the defendant is
believed to reside.
Subsequent stages
 If the defendant feels that the manner in which the summons has been served on him
renders such service ineffectual, then he may request the court which issued the
summons to set aside the service.
 Where the defendant has been duly served, then:
 In the case of a summons to appear, the defendant can (and if so required by the
court, must) present to the court a written statement of defense not later than seven
days before the first hearing.
 In the case of a summons to file a defense plea, where the defendant wishes to
defend the claim, it must present to the court a written statement of his defense within
21 days from the date of service.
 If a defendant admits the claim in full, it can make such admission verbally when he
appears before court in answer to the summons. In such an event, he need not file a
written statement of defence. On his admission of the whole claim the court will
ordinarily enter judgment for the claimant against him as prayed.
Interim remedies 146

9. What actions can a party bring for a case to be dismissed before a full trial? On
what grounds must such a claim be brought? What is the applicable procedure?
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A court can dismiss a case before a full trial if:
a. A party has not filed a defense plea or neither party appears in court at a
prescribed date.
b. A summons is not served due to the claimant’s failure to pay the appropriate
fee.
c. The claimant does not apply for a fresh summons to be issued within three
months from when the first summons is returned unserved.
d. The claimant files an application for a default judgment supported by evidence
for the claim.
10. Can a defendant apply for an order for the claimant to provide security for its
costs? If yes, on what grounds?
 The court may, either on its own motion or on the defendant’s application, order the
claimant, to provide security, within a prescribed period, for the payment of all costs
incurred and likely to be incurred by the defendant.
 A defendant can apply for an order for the claimant to provide security for its costs at
any stage of a proceeding in one of the following circumstances:
 The defendant is not resident in Tanzania.
 The defendant does not possess any immovable property in Tanzania other than the
property in question, as the case may be.

11. What are the rules concerning interim injunctions granted before a full trial?
Availability and grounds
Interim injunctions are available on the following grounds:
 Assets in dispute are in danger of being dissipated or may suffer loss of value by
reason of its continued use by a defendant, or may be wrongly sold in execution of a
decree.
 The defendant threatens, or intends to remove or dispose of, its property with a view to
defraud its creditors.
 The court may grant a temporary injunction to restrain such act or make such other
order for the purpose of staying and preventing the wasting, damaging, alienation,
sale, loss in value, removal or disposition of the property as the court thinks fit, until
the disposal of the claim or until further orders.
 A temporary injunction cannot be granted against the government but the court may
make a declaratory order in relation to the rights of the parties in lieu thereof. 147
Prior notice/same-day

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  In Tanzania, an interim injunction can be obtained without prior notice to the defendant
and on the same day in urgent cases.
Mandatory injunctions
 Mandatory interim injunctions to compel a party to do something are available in
addition to prohibitory interim injunctions to stop a party from doing something. Both
mandatory interim injunctions and prohibitory interim injunctions are available.
Rights of appeal
Interim orders are not appealable.
12. What are the rules relating to interim attachment orders to preserve assets pending
judgment or a final order (or equivalent)?
Availability and grounds
 Interim attachment orders are available to preserve assets pending judgment or a final
order. The orders are available at any stage of court proceedings, where the court is
satisfied that the defendant intends to obstruct or delay the execution of any decree
that may be passed against him and is about to do one of the following:
Dispose of all or part of its assets.
 Remove all or part of its assets from the jurisdiction of the court.
 The claimant must, unless the court otherwise directs, specify the property to be
attached and the estimated value of it.
 The court may order the defendant, within a specified time, to:
 Furnish security, in the amount specified in the order.
 Produce and place at the disposal of the court, when required, the specified assets or
the value of the same, or such portion thereof as may be sufficient to in the
circumstances.
 Appear in court and prove why it should not furnish security.
Prior notice/same-day
 Interim attachment orders can be obtained without prior notice to the defendant and on
the same day in urgent cases.
Main proceedings
 Interim attachment orders cannot be granted in support of substantive proceedings 148
that are taking place in the courts of another country.
Preferential right or lien
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  Attachment does create a lien in favor of the claimant over the seized assets.
Damages as a result
 The claimant is not be liable for damage suffered by the defendant as a result of the
attachment.
Security
The claimant does not have to provide security.
13. Are any other interim remedies commonly available and obtained?
 No other interim remedies are available.
Final remedies
14. What remedies are available at the full trial stage? Are damages just compensatory
or can they also be punitive?
 The available remedies at the full trial are damages, declarations and injunctions.
Damages can be compensatory as well as punitive. The standard of proof in civil
litigation is “on the balance of probabilities”.
Evidence
Disclosure
15. What documents must the parties disclose to the other parties and/or the court?
Are there any detailed rules governing this procedure?
 The parties must produce, at the first hearing:
a. Documents on which they intend to rely and which have not already been filed
in court.
b. All documents which the court has ordered to be produced
 No documents can be submitted to the court at any subsequent stage of the
proceedings unless good cause is shown to the satisfaction of the court for failure to
produce the documents in question earlier. The court must record its reasons for the
subsequent acceptance of documents.
Privileged documents
16. Are any documents privileged? If privilege is not recognized, are there any other
rules allowing a party not to disclose a document?
Privileged documents 149

 Documents relating to official records and professional communications cannot be

admitted as evidence if, in the opinion of the Minister of Justice, it would be prejudicial
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 to the public interest either by reason of the content thereof or on grounds of public
policy.
 Professional communications between the client and its lawyer and advice given by in-
house counsel are also privileged.
 Without prejudice privilege is also recognized in Tanzania.
Other non-disclosure situations
A document may be considered confidential either:
a. If it contains commercial secrets.
b. For public interest reasons.
c. Examination of witnesses

17. Do witnesses of fact give oral evidence or do they just submit written evidence? Is
there a right to cross-examine witnesses of fact?
Oral evidence
 Witnesses of fact can give oral evidence, provided a summons is issued for the
witness to attend trial and give oral evidence.
Right to cross-examine
 Parties can cross-examine witnesses of fact. Advocates cross-examining their own
witnesses are limited to matters that arose during the counter party’s cross-
examination.
Third party experts
18. What are the rules in relation to third party experts?
Appointment procedure
 Experts can be appointed by the parties to provide evidence that is required to resolve
the dispute and support their case. The court can appoint an expert to clarify some
points for the benefit of the court. There is no obligation to disclose the identity of the
party appointed expert witnesses at the disclosure stage as only the number of
witnesses must be disclosed, and not their names.
Role of experts
 This depends, to an extent, on whether the expert witness is appointed by a party or 150
by the court:
 If an expert witness is called by one of the parties, he will represent the interests of
that party.
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  A court-appointed expert should provide independent advice.
Right of reply
 Experts can be called in to give oral evidence and can be cross-examined if conflicting
issues cannot be documented and discussed in separate hearings.
Fees
 Fees are paid by the party appointing the expert. The government pays the court-
appointed expert in criminal cases only. In civil cases, court-appointed experts are
paid by the parties, in proportion that the court sees fit.
Appeals
19. What are the rules concerning appeals of first instance judgments in large
commercial disputes?
Which courts
 Decisions of the Magistrates’ Court can be appealed at the High Court. Decisions of
the High Court (and as such, the Commercial Court), can be appealed at the Court of
Appeal. Appeals from the specialized tribunals and boards under Ministries lie to the
Court of Appeal.
Grounds for appeal
 An appeal can be brought on a point of law or fact. The appellant must submit a
memorandum of appeal clearly stating its objections.
Time limit
 To appeal a decision of the High Court before the Court of Appeal, a notice of appeal
must be made within 30 days from the date of judgment and a memorandum of appeal
must be filed within 60 days from the date of judgment. The notice of appeal notifies
the court and the other party of the intention to appeal against the whole or part of the
decision which the party is not satisfied with and a memorandum of appeal specifically
states the grounds of appeal.
 For an appeal of a decision of the Magistrates’ Court at the High Court, a notice of
appeal must be filed within 14 days from the date of judgment and memorandum of
appeal must be filed within 30 days from the date of judgment.
Class actions/ third parties procedure 151

20. Are there any mechanisms available for collective redress or class actions?

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  There are mechanisms available for collective redress or class actions. Where
numerous persons have the same interest in a claim, one or more of such persons
can, with the permission of the court, sue or be sued, or defend, on behalf of or for the
benefit of all persons so interested. In this case, the court must, at the representative’s
expense, notify all interested parties of the proceedings either by personal service or,
where this is not reasonably practicable, by public advertisement. Any person on
whose behalf or for whose benefit a claim is instituted or defended can apply to the
court to be made a party to such claim.
Costs
21. Does the unsuccessful party have to pay the successful party’s costs and how
does the court usually calculate any costs award? What factors does the court
consider when awarding costs?
 In most cases, the successful party is awarded costs. The court may order that
security for costs be provided. The amount and time for payment are set by the court.
 Factors that the court will consider when awarding costs depend on the complexity of
the matter, and its nature and importance.
22. Is interest awarded on costs? If yes, how is it calculated?
 The court may award interest on costs at any rate not exceeding 7% per annum and
such interest is added to the costs and is recoverable as such.
Enforcement of a local judgment
23. What are the procedures to enforce a local judgment in the local courts?
A party wishing to enforce a local judgment must apply to the court which issued the decree
or to the officer appointed for that purpose. An application must be in writing, signed and
verified by the applicant or by some other person proved to the satisfaction of the court to be
acquainted with the facts of the case, and must contain in a tabular form the following
particulars (Order XXI, section 10 (2), CPC):
a. The reference number of the claim.
b. The description of the parties.
c. The date of the judgment.
Whether an appeal has been made.
 What (if any) payment or other adjustment has been made between the partiesc
subsequent to the judgment. 152
 Any previous enforcement applications that have been made, the dates of such
applications and their outcome.

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  The amount with interest (if any) due under the judgment or other relief granted,
together with particulars of any counterclaim, whether passed before or after the date
of the judgment.
 The amount of the costs, if awarded.
 The description of the party against whom the enforcement is sought.
The type of court assistance required. This can include, for example:
 Delivery of specific property;
 Attachment and sale, or sale without attachment, of any property;
 Arrest and detention in prison of any person;
 Appointment of a receiver.
Cross-border litigation
24. Do local courts respect the choice of governing law in a contract? If yes, are there
any areas of law in your jurisdiction that apply to the contract despite the choice of
law?
 Local courts respect the choice of governing law in a contract. There are no areas of
law that apply to the contract despite the choice of law.
25. Do local courts respect the choice of jurisdiction in a contract? Do local courts
claim jurisdiction over a dispute in some circumstances, despite the choice of
jurisdiction?
 Local courts respect the choice of jurisdiction in a contract. They do, however, claim
jurisdiction over disputes concerning land in Tanzania.
26. If a foreign party obtains permission from its local courts to serve proceedings on a
party in your jurisdiction, what is the procedure to effect service in your
jurisdiction? Is your jurisdiction party to any international agreements affecting this
process?
 Under the CPC, service will be deemed effective when judicial documents are served
in person or by postal channels, directly on the party or the party’s recognised agent in
Tanzania.
 Tanzania is not party to any international agreements affecting this process.

27. What is the procedure to take evidence from a witness in your jurisdiction for use in
proceedings in another jurisdiction? Is your jurisdiction party to an international
convention on this issue?
 The procedure will depend on the law of the jurisdiction where proceedings are taking 153
place. A foreign party must obtain permission from the court where the proceedings
are being heard in order to take evidence from a witness in Tanzania.
 Tanzania is not party to any international convention on this issue.
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Enforcement of a foreign judgment
28. What are the procedures to enforce a foreign judgment in the local courts?
 The Reciprocal Enforcement of Foreign Judgment Act (R.E 2002 Cap 8) provides for
the reciprocal enforcement of judgments as between Mainland Tanzania and foreign
jurisdictions. The main jurisdictions whose judgments can be enforced are:
a. Lesotho.
b. Botswana.
c. Sri Lanka.
d. Mauritius.
e. New South Wales.
f. Zambia.
g. Seychelles.
h. Somalia.
i. Zimbabwe.
j. The Kingdom of Swaziland.
k. The UK.
 Judgments from these jurisdictions have the same force and effect as if they had been
originally given and delivered by the High Court of Tanzania. To enforce a judgment,
an application to the High Court must be made to have the judgment registered. The
application must be made at any time within six years after the date of judgment.
 The application to register a judgment will be denied if:
 The judgment is not a judgment to which the Reciprocal Enforcement of Foreign
Judgment Act applies or its registration contravenes the provisions of this Act.
 The court that issued the judgment had no jurisdiction in the circumstances of the
case.
 The judgment debtor did not receive notice of the proceedings in sufficient time
(notwithstanding that process may have been duly served on him in accordance with
the law of the country of the original court) to enable him to defend the proceedings
and did not appear in court.
 The judgment was obtained by fraud.
 The enforcement of the judgment would be contrary to public policy of Tanzania.
 The rights under the judgment are not vested in the applicant.
 US judgments are not enforceable in the Tanzanian courts because there is no
arrangement in place for the reciprocal enforcement of judgments between the US and
Tanzania.
154
 There are no bilateral treaties covering enforcement of judgments that Tanzania has
entered to.
There are no blocking statutes in Tanzania that prohibit enforcement of certain judgments.
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Alternative dispute resolution
29. What are the main alternative dispute resolution (ADR) methods used in your
jurisdiction to settle large commercial disputes? Is ADR used more in certain
industries? What proportion of large commercial disputes is settled through ADR?
 The main ADR methods used in Tanzania comprise arbitration, reconciliation, and
mediation. In commercial disputes arbitration is a common choice, particularly in
contracts facilitating inward foreign direct investment or other commercial activity in
Tanzania. Virtually all agreements between foreign investors and state authorities or
local companies contain an arbitration clause.
 In addition, arbitration clauses are regularly inserted in domestic commercial
agreements, as a growing number of parties to commercial agreements are beginning
to recognize the advantages of arbitration over litigation in domestic courts. However,
domestic arbitration under the Arbitration Act (Cap 15 R.E. 2002) is often conducted
inefficiently and there is a possibility of delaying tactics by resistant parties.
Reconciliation and meditation are binding once the mediator has recorded the settlement.
30. Does ADR form part of court procedures or does it only apply if the parties agree?
Can courts compel the use of ADR?

 The local courts encourage parties to use ADR and in some cases parties can be
compelled to use ADR. Where reconciliation, mediation or other similar ADR
procedure is ordered by the court, such procedure, with the exception of arbitration,
must be conducted in accordance with any directions issued by the Chief Justice
(Order VIIIC(1), CPC).
 Under the High Court (Commercial Division) Procedure Rules, where the Commercial
Court directs the parties to submit to mediation, the court must appoint a mediator
who, in turn, must set the date for the first mediation session within seven days of
appointment.

31. How is evidence given in ADR? Can documents produced or admissions made
during (or for the purposes of) the ADR later be protected from disclosure by
privilege? Is ADR confidential?
The way evidence is given in ADR depends very much on the tribunal conducting the ADR
 Documents used in ADR are usually confidential. All communications at a mediation
session and the mediator’s notes and records are deemed to be confidential and the 155
parties to a mediation cannot rely on the record of statement made at or any
information obtained during the mediation as evidence in court proceedings or any

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 other subsequent settlement initiative, except in relation to proceedings brought by
either party to challenge the settlement agreement on the grounds of fraud.

32. How are costs dealt with in ADR?

 The court may make such order as it thinks fit in relation to costs. In arbitration, the
court will first look at the provisions of the applicable arbitration agreement

33. What are the main bodies that offer ADR services in your jurisdiction?
There are two principal arbitration bodies, both with their own set of arbitral rules:
a. Tanzania Institute of Arbitrators (TIA).
b. National Construction Council (NCC)
 The NCC is a statutory body created under the National Construction Council Act (no.
20 of 1979). In 2001, the NCC adopted a set of Arbitration Rules, to enable parties to
settle their construction disputes under these Rules. However, since arbitration is
relatively undeveloped in Tanzania, parties can resolve their dispute under the NCC
Arbitration Rules, regardless of the subject matter of the dispute.

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