MOI UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT SCIENCE AND ENTREPRENEURSHIP
PROGRAMME: BSc. in Human Resource Management

NAME: JOHN POWELL MILIMU

REG No. BHR/1837/21
COURSE CODE: BHR 101
COURSE TITLE: BUSINESS LAW
PRESENTED TO: MRS. BETTY BII
TASK: CAT ONE
DATE DUE: March 8, 2021

STUDENT SIGN. ……………………………………

Question One
1. Explain the requirements of the hire purchase agreement
Before a hire-purchase agreement is entered into in respect of any goods, the owner shall
state in writing in the prescribed form to the prospective hirer, otherwise than in the
agreement, a price at which the goods may be purchased by him for cash (in this section
referred to as the cash price):
Provided that this subsection shall be taken to have been sufficiently complied with—
if the hirer has inspected the goods or like goods, and at the time of his inspection tickets or
labels were attached to or displayed with the goods clearly stating the cash price, either of the
goods as a whole or of all the different articles or sets of articles comprised therein; or
if the hirer has selected the goods by reference to a catalogue, price list or advertisement
which clearly stated the cash price, either of the goods as a whole or of all the different
articles or sets of articles comprised therein.
An owner shall not be entitled to enforce a hire-purchase agreement or any contract of
guarantee relating to it or any right to recover the goods from the hirer, and no security given
by the hirer in respect of money payable under the hire-purchase agreement or given by a
guarantor in respect of money payable under a contract of guarantee relating to the hire-
purchase agreement shall be enforceable against the hirer or guarantor by any holder thereof,
unless the requirement specified in subsection (1) has been complied with, and the agreement
is made and signed by the hirer and by or on behalf of all other parties to the agreement; and
the agreement contains a statement of—
i. the hire-purchase price and the cash price of the goods to which the agreement
relates; and
ii. the amount of each of the instalments by which the hire-purchase price is to be
paid and the date (or the mode of determining the date) upon which each
instalment is payable; and a description of the goods sufficient to identify them;
and
the agreement contains a notice in the prescribed form relating to the rights of the hirer
which is at least as prominent as the rest of the contents of the agreement; and a copy of
the agreement has been delivered or sent by registered post by the owner to the hirer
within twenty-one days of the date of the agreement.
If the Court is satisfied in any suit that a failure to comply with the requirement has not
prejudiced the hirer, and that it would be just to dispense with the requirement, the Court
may, subject to any conditions that it thinks fit to impose, dispense with that requirement
for the purposes of the suit.
2. Describe the implied terms of hire purchase agreement
In every hire-purchase agreement there shall be implied—
a condition that the owner will have a right to sell the goods at the time when the property
is to pass; a warranty that the hirer shall have and enjoy quiet possession of goods;
a warranty that the goods will be free from any charge or encumbrance in favor of a third
party at the time when the property is to pass;
except where the goods are second-hand goods and the agreement contains a statement to
that effect, a condition that the goods will be of merchantable quality; and
a condition that the legal ownership of, and title to, the goods shall automatically be
vested on the hirer upon payment by him of the hire-purchase price in full:
Provided that no such condition shall be implied by virtue of this subsection as regards
defects of which the owner could not reasonably have been aware at the time when the
agreement was made or, if the hirer has examined the goods or a sample of them, as
regards defects which the examination revealed or ought to have revealed.
 Where the hirer expressly or by implication makes known the particular purpose for
which the goods are required, there shall be implied a condition that the goods will be
reasonably fit for that purpose.
The conditions and warranties set out in subsection (1) of this section shall be implied
notwithstanding any agreement to the contrary; and the owner shall not be entitled to rely
on any provision in the agreement excluding or modifying the condition set out in
subsection (2) unless he proves that before the agreement was made the provision was
brought to the notice of the hirer and its effect made clear to him.
Nothing in this section excludes or prejudices the operation of any other law whereby any
condition or warranty is to be implied in an agreement.
3. Explain the provisions of the hire purchase Act on termination of the higher purchase
agreement
Hirer may terminate agreement
At any time before the final payment under a hire-purchase agreement falls due, the hirer
may terminate the agreement by returning the goods to the owner and giving him written
notice of termination of the agreement, and if he does so he shall be liable (without
prejudice to any liability which accrued before the termination) to pay the amount, if any,
by which one-half of the hire-purchase price exceeds the total of the sums paid and the
sums which were due in respect of the hire-purchase price immediately before the
termination or such lesser amount as may be specified in the agreement.
Where a hire-purchase agreement has been terminated under this section, the hire shall, if
he has failed to take reasonable care of the goods, be liable to pay damages for the
failure.
A hirer returning goods under subsection (1) shall return them at his own expense to the
premises from which they were originally supplied to him or to such other place as the
owner may direct:
Provided that the owner shall reimburse the hirer for any additional expense incurred in
returning the goods to premises other than those from which they were originally
supplied.
Nothing in this section prejudices any right of a hirer to determine a hire-purchase
agreement otherwise than by virtue of this section.
Hirer may complete agreement
The hirer under a hire-purchase agreement may give notice in writing to the owner of his
intention to complete the purchase of the goods by paying or tendering to the owner on a
specified day the net balance due to the owner under the agreement, and having given
such notice may complete the purchase accordingly on the day specified.
For the purposes of subsection (1) of this section, the net balance due is the balance
originally payable under the agreement less any amounts (other than the deposit) paid or
provided, whether by cash or by other consideration, by or on behalf of the hirer under
the agreement.
The rights conferred on the hirer by this section may be exercised by him—
at any time during the continuance of the agreement; or
 within twenty-eight days after the owner has taken possession of the goods, upon paying
or tendering to the owner in addition to the net balance due—the reasonable costs
incurred by the owner in and incidental to taking possession of the goods; and any
amount properly expended by the owner on the storage, repair or maintenance of the
goods; and any additional interest which is due under the agreement.
4. Explain the provisions of the higher purchase Act on Recovery of goods by the seller

Adverse possession
Where an owner institutes a suit to enforce a right to recover possession of goods from a
hirer and proves that, before the institution of the suit and after the right to recover
possession of the goods accrued, he made a request in writing to the hirer to surrender the
goods, the hirer’s possession of the goods shall, for the purpose of the owner’s claim to
recover possession thereof, be deemed to be adverse to the owner.
Recovery of possession where two-thirds of price paid
Where goods have been let under a hire-purchase agreement and two-thirds of the hire-
purchase price has been paid, whether in pursuance of the agreement or of a judgment or
otherwise, or has been tendered by or on behalf of the hirer or a guarantor, the owner
shall not enforce any right to recover possession of the goods from the hirer otherwise
than by suit.
If an owner retakes possession of goods in contravention of subsection (1), the hire-
purchase agreement, if not previously terminated, shall terminate and—
the hirer shall be released from all liability under the agreement and shall be entitled to
recover from the owner by suit all sums paid by the hirer under the agreement or under
any security given by him in respect thereof; and
guarantor shall be entitled to recover from the owner by suit all sums paid by him under
the contract of guarantee or under any security given by him in respect thereof.
This section does not apply where the hirer has terminated the agreement or the bailment
by virtue of any right vested in him, or to the removal of goods under section 16(3)(b).

Provisions where suit instituted

Where a suit is instituted in the circumstances described in section 15 of this Act, the
owner shall not take any step to enforce payment of any sum due under the hire-purchase
agreement or under any contract of guarantee relating thereto, except by claiming the sum
in the suit.
Subject to rules of court, all the parties to the agreement and any guarantor shall be made
parties to the suit.
Pending the hearing of the suit—
the court shall have power, in addition to any other powers, to make upon the application
of the owner such orders as the court thinks just for the purpose of protecting the goods
from damage or depreciation, including orders restricting or prohibiting the use of the
goods or giving directions as to their custody; and
without prejudice to the powers of the court under paragraph (a) of this subsection, where
two instalments of the hire-purchase price are due and unpaid the owner may remove the
 whole or any part of the goods to any premises under his control for the purpose of
protecting them from damage or depreciation and retain them there pending the hearing
of the suit, and the owner shall be liable to the hirer for any damage or loss which may be
caused to them there after such removal but shall not be taken to have repossessed the
goods for the purposes of this Act or of the hire-purchase agreement by reason of his
having so done.
Question Two
I. Explain the meaning of negotiable instruments
A negotiable instrument is a signed document that promises a sum of payment to a specified
person or the assignee. A transferable signed document that promises to pay the bearer a sum of
money at a future date or on demand. The payee, who is the person receiving the payment, must
be named or otherwise indicated on the instrument. The types of negotiable instruments include
personal cheques, personal cheques, money order, promissory notes, certificate of deposit among
others.
Because they are transferable and assignable, some negotiable instruments may trade on a
secondary market. This nature of them being transferable allows the holder to take the funds as
cash or use them in a manner appropriate for the transaction or according to their preference.

Negotiable instruments are distinct from non-negotiable instruments in that they can be
transferred to different people, and, in that case, the new holder obtains full legal title to it.
Negotiable instruments contain key information such as principal amount, interest rate, date, and,
most importantly, the signature of the payor.

II. Describe the characteristics of negotiable instruments

Easily Transferable: A negotiable instrument is easily and freely transferable. There are no
formalities or much paperwork involved in such a transfer. The ownership of an instrument can
transfer simply by delivery or by a valid endorsement.

Must be in Writing: All negotiable instruments must be in writing. This includes handwritten
notes, printed, engraved, typed, etc.

Time of Payment must be Certain: If the order is to pay when convenient then such an order is not
a negotiable instrument. Here the time period has to be certain even if it is not a specific date. For
example, it is acceptable if the time of payment is linked with the death of a specific individual.
As death is a certain event.

Payee also must be certain: The person to whom the payment is to be made must be a specific
person or persons. Also, there can be more than one payee for a negotiable instrument. And
“person” includes artificial persons as well, like body corporates, trade unions, chairman,
secretary etc.
 III. Describe the various types of holders to a bill
The holder of a bill is the person who is in possession of it and may be either the payee, or an
endorser, or the bearer. Includes:
Drawer: Drawer is the person who makes or writes the bill of exchange. Normally, he is the seller.
Drawee: Drawee is the person on whom the bill of exchange is drawn for his acceptance.
Normally, he is the buyer. He has to pay the amount of the bill of exchange to the drawer on the
due date. Payee: The payee is the person to whom the amount of bill of exchange is to be paid.
The payee can be the drawer himself or the creditor of the drawer. Endorser: Endorser is the
person who transfers rights of payment. Endorsee: Endorsee is the person in whose favor the bill
of exchange is endorsed by the drawer. Bearer: Bearer is the person in possession of the bearer
bill of exchange.

IV. Explain the difference between cheques and other negotiable instruments
A cheque is a type of bill of exchange, used for the purpose of making payment to any person. It
is an unconditional order, addressing the drawee to make payment on behalf the drawer, a certain
sum of money to the payee. A cheque is always payable on demand

1. An instrument used to make payments, that can be just transferred by hand delivery is
known as the cheque. An acknowledgment prepared by the creditor to show the
indebtedness of the debtor who accepts it for payment is known as a bill of exchange.
2. A Cheque is defined in section 6 while Bill of Exchange is specified in section 5 of the
Negotiable Instrument Act, 1881
3. The drawer and payee are always different in the case of a cheque. In general, drawer and
payee are the same persons in the case of a bill of exchange.
4. The stamp is not required in cheque. Conversely, a bill of exchange must be stamped.
5. A cheque is payable to the bearer on demand. As opposed to the bill of exchange, it
cannot be made payable to the bearer on demand.
6. The cheque can be crossed, but a Bill of Exchange cannot be crossed.
7. There is no days of grace allowed in cheque, as the amount is paid at the time of
presentment of the cheque. Three days of grace are allowed in the bill of exchange.
8. A cheque does not need acceptance whereas a bill needs to be accepted by the drawee.

V. Distinguish between promissory note and bills of exchange

Promissory notes are documents containing a written promise between parties – one party (the
payor) is promising to pay the other party (the payee) a specified amount of money at a certain
date in the future. Like other negotiable instruments, promissory notes contain all the relevant
information for the promise, such as the specified principal amount, Interest Rate An interest rate
refers to the amount charged by a lender to a borrower for any form of debt given, generally
expressed as a percentage of the principal., term length, date of issuance, and signature of the
payor. The promissory note primarily enables individuals or corporations to obtain financing
from a source other than a bank or financial institution. Those who issue a promissory note
become lenders. While promissory notes are not as informal as an IOU, which merely indicates
that there is a debt, it is not as formal and rigid as a loan contract, which is more detailed and
lists out the consequences if the note is not paid and other effects.

A bill of exchange in the other hand is a negotiable instrument, contains an unconditional order,
directing the drawee to pay a certain sum of money to payee addressed in the instrument. The bill
is made and signed by the drawer and accepted by the drawee. It contains a pre-determined date
on which the payment is to be made to the payee. It can be payable on demand when the bill is
discounted with the bank. The parties to the bill of exchange must be certain.
The difference between a promissory note and a bill of exchange is that the latter is transferable
and can bind one party to pay a third party that was not involved in its creation. Banknotes are
common forms of promissory notes. A bill of exchange is issued by the creditor and orders a
debtor to pay a particular amount within a given period of time. The promissory note, on the
other hand, is issued by the debtor and is a promise to pay a particular amount of money in a
given period.