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CONTRACT LAW REVIEW NOTES
CONTRACT OF BAILMENT& LAW OF
BANKRUPTCY
BAILMENT - Is the delivery of goods from one person {bailer} to another {bailee} on the condition express or implied in the contract that goods shall be returned to the bailor as soon as the purpose for which they have bailed has been completed. If the person already in possession of the goods of another contracts to hold them as bailee, he thereby becomes the bailee and the owner becomes the tailor of such goods although they may not have been delivered by way of bailment. This is bailment by “attornement” SALIENT FEATURE OF BAILMENT Since the essence of bailment is the delivery of goods for the stated purpose and their return on the completion of that purpose, and their return on the completion of that purpose,it is only the possession that passes from the owner to the other and not the ownership.
1. Thus a loan of money is not a bailment and there is no obligation to return the obligation money, but a relationship of creditor and debtor is created. TYPES OF BAILMENT
a. DEPOSIT: This may take place when the owner deposits the goods in a cloakroom or left-luggage office for safe custody. The Bailee is not entitled to bring the goods in his use and must exercise reasonable care of them while in his custody. If the goods are delivered to a wrong person, the bailee is not protected in any circumstances.
- Hire The hire of hoods under the hire purchase agreement or otherwise is responsible to exercise care of goods long possession. But he is not liable for loss due to robbery or accidental fire which resulted without any negligence on his part. If the hirer further subjects the goods or sells them except in accordance with the agreement, the contract is determined and the owner may recover the goods from the purchaser even though he was unaware of hiring. The hirer himself is also liable for tort of conversion.
- Loan Sometimes the goods are left as a security with the money-lender for raising a temporary loan. In this case, the lender is not allowed to bring the goods to his use unless he was permitted to do so in the contract.
- Deposit for work to be done This type of bailment is very common and takes place whe the owner of the goods delivers the same for repair or alteration such as
In all cases of bailment, the bailee is bound to take as much care of the goods bailed to him as a man or ordinary prudence wound under similar circumstances take care of his own goods of the same type. Where the goods are stolen from his possession, it is his duty to report the matter to the police.
- He must not be negligent But if the loss of goods is due to an act of God or violent robbery, a bailee is not liable.
- Unauthorized use of goods The bailee in any type of bailement is under duty not to use the goods in a manner inconsistent with the terms of bailment. If he does so, he becomes liable for such loss unless such use is necessary for the preservation of the goods.
- To return the goods It is the duty of bailee to return the goods without demand on the expiry of the date fixed when the purpose is accomplished. In the following situations,the bailee was held liable to pay damages: a) Where the goods were stole by the servant of bailee b) Where the patient handled over her jewellery for sale custody and it was lost by hospital authorities who were held liable. It must be noted that it is not enough for the bailee to establish that the loss of the bailed goods resulted without any negligence on his
part, but he must show that he exercised reasonable care to assist in their recovery and reported the matter to the police immediately after the loss. DUTIES OF BAILOR
- To disclose defects It is the primary duty of the bailor to disclose the faults in the goods bailed so far as they are known to him.
Definition According to Blackstone: Bankruptcy is a proceeding by which, when a debtor cannot pay his debt or discharge his liabilities or the person to whom he owes money or has incurred liabilities cannot obtain satisfaction of their claims. The courts in certain circumstances take possession of his property by an officer appointed for the purpose, and such property is realized and distributed in equal proportions among the persons to whom the debtor owes money or has incurred peaniary liabilities.
A person is insolvent or bankrupt who cannot pay his debt or discharge his liabilities on the due date. The creditors or the debtor himself may present a petition in court that a receiving order should be made. Object of Bankruptcy
- Protection of honest debtors
- Safeguarding the interest of creditors by means equitable distribution of the assets of an insolvent debtor among creditors. When a person adjudicated bankrupt, all his assets are taken over by an officer of the court and distributed in equal proportions among the creditors. After the distribution is complete, the unpaid debts are cancelled and the bankrupt is allowed to engage in trade or service without any of his previous obligations. The creditors loose part of their claims and the debtor is free to make a new life start in life Who can be made bankrupt In general, any person capable of entering into a contract may be made bankrupt exept:
- minors or infants It is only if an infant has incurred debts which are legally enforceable against him such as for the purchase of necessaries that he can be declared bankrupt.
- Lunatics A person of unsound mind may be made bankrupt if the act of bankruptcy was committed during a lucid interval.
- Partners
Before any proceedings in bankruptcy can be taken against a person, he must have committed an act of bankruptcy. Section,3(1) of the act lists eight acts of bankruptcy.
- If the debtor in Kenya or elsewhere makes a conveyance or assignment of his property to a trustee for the benefit of his creditors generally.
- If he makes a fraudent conveyance, gift, delivery, or transfer of his property or any part therefore.
- If he makes a conveyance or transfer of his property which amounts to a fraudent preference.
- If with intent to defeat or delay his creditors, he departs or remains out of Kenya or otherwise hides from his creditors or begins to keep house-that is refuses to see his creditors when they call at his house.
- If his goods have been seized by the court official in the execution of the decree of any court for the payment of money.
- If he files in the court a declaration of his inability to pay his debts or presents a bankruptcy petition against himself.
- If he fails to comply with a bankruptcy notice.
- If he gives notice to any of his creditors that he has suspended, or that he is about to suspend payments of his depts. PROCEDURE IN BANKRUPTCY There are seven stages in the process by which a debtor is declared bankrupt and altimetry obtains his discharge to start a new life in his trade or profession.
- Bankruptcy petition A bankruptcy petition may be presented by a creditor or the debtor. If
presented by a creditor , section six set out the following conditions a. The debt owing to him is at least Ksh 1000. It’s possible for two or more creditors to join the petition. b. The debt is liquidated sum, payable either immediately or at some certain future time. c. The act of bankruptcy has been committed by the debtor d. The act of bankruptcy on which the petition is based has been committed within the past three months.
- Receiving orders
answer any question he shall be guilty of contempt of court. If the debtor does not attend his public examination , having had notice a warrant may be issued for his arrest.
- Adjudication order: If the creditors do not accept composition or a scheme of arrangement the debtor will be adjudicated bankrupt. All his assets are applied by the trustee or the official receiver to satisfy his debts.
- Annulment of adjudication:
An adjudication of bankruptcy may be annulled by the courts: When the debtor ought not to have been adjudicated bankrupt If the creditor accept a composition or scheme after adjudication Where the debts of the bankrupt are paid in full DISCHARGE OF DEBTOR In Kenya, section 29(1) of the act provides that a bankrupt may apply for an order of his discharge as soon as the debtors have been paid in full The court will fix a day to hear his application in the presence of his creditors but before this he must undergo a public examination. This is conducted in the open court and the debtors may be questioned by the official receiver trustee and the creditor If the court is satisfied that the bankruptcy is not fraudlent , it may grant an absolute discharge. Effect of discharge: An order discharging a bankrupt releases him from all debts provable in bankruptcy except those mentioned below: a) Any debt due to the government b) Any debt or liability incurred by means of any fraud or fraudlent breach of trust to which he was a party. Refusal of discharge In the following circumstances, the court cannot grant an absolute
f) He has caused any of his creditors to pay unnecessary expenses by frivolous or vexations defences to any action properly brought against him. g) If the bankrupt gave undue preference to one of his creditor within three months of receiving order when unable to pay his debts as they fell due. h) That within three months of the receiving order and with the prospect of bankruptcy before him, he incurred debts in order to make his assets ten shillings in pound i) There have been previous bankruptcy proceedings against or he has previously made a composition with his creditors. j) He is guilty of fraudlet breach of trust DISABILITIES OF UNDISCHARGED BANKRUPT As long as the bankrupt remains undischarged he suffers from the following disabilities He cannot acquire credit for more than two hundred shillings without disclosing his bankruptcy. He cannot acquire property free from the claims of trustee in the bankruptcy. He must not trade in a name that is not his own without disclosing that he is undischarged bankrupt. He cannot be appointed or continue to be a director of t6he company. He cannot be elected to or sit as a member of a local authority or the National Assemly.
