COMMERCIAL LAW AC 107

C67um NEGOTIABLE INTRUMENTS

ACCORDING TO Christie the origins of negotiable instruments, may have been the Arab
merchants in the 12th century.

The basic rule is that provided a document complies with the legal requirements, it may be
transferred from one person to another.

Where an instrument does not comply with the legal requirements it may be entirely value
less.

In Zimbabwe the Bills of Exchange Act [Chapter 14.02] is the law that governs bills of
exchange.It was imported from the English Bills of Exchange Act 1882

Bills of Exchange are categorised as follows

_ Promissory Notes

_ Bills of Exchange

_ Cheques

PROMISSORY NOTES

Definition

The promissory note is defined as an unconditional promise in writing made by one person
to another, signed by the maker. Promising to pay on demand or at a fixed date or
determinable future time a sum certain in money to , or to the order of a specified person
or bearer - Christie HR P 191

Example

23 April 2015

I promise to pay Jacob Manzunzu or order on demand , the sum of us $ 1000 for value
received .

John Moyo

If the instruction fails to comply with the worded definition it is not a promissory note,

Since it is not promissory note and therefore it is not negotiable free of equities.

It may however be evidence on the amount of the contract.

The requirements for a valid promissory note are therefore the following

1] The promise to pay must be unconditional and unqualified

2] A promissory note should not be a mere intention to pay . It must be an

unequivocal promise to pay . An I.O.U is not a promissory note

3 The promissory note must be in writing

4] The note must be made by one pardon to another. If the maker makes it payable to
himself there maybe challenges until he endorses to another. The payee must be defined
with reasonable certainty, although it is permissible to make it payable to the bearer. The
payee may be the holder of an office eg chairperson of club.

5] The maker of the promisory note has to sign the promissory note . An Agent may
sign on behalf of the maker .

6] The promised date of payment has to be ascertained or fixed or determinable . the

day of the payment should not be in the past otherwise the note would not be valid
.The note may indicate it is payable on sight or on presentation . it may be on a future
date or w/l a certain time because if it is too uncertain the note may be ante-dated .

post-dated or dated on a Sunday

7] The amount to be paid is to be a certain sum . A promise to pay a certain sum of

money, bills, and bank charges is not a promise to pay a certain some of money .

NON TRANSFERABLE NOTES

A note may prohibit transfer to another person if it is endorsed with the words .

''NOT TRANSFERABLE''

Or

A/C PAYABLE ONLY

A note that prohibits its transfer is not negotiable. The prohibition must be clear and legible.

The words not negotiable are not enough nor does the crossing of a cheque.

A company maybe deemed to have signed by the placing of a signature only. An agent may
sign in his own name or, on behalf of the Company. The Company is bound only if the agent
signs within the limits of his authority. An unauthorised signature is inoperative. To
complete the transaction the note must be delivered to the payee

The contract must be supported by valuable consideration. This is determined by asking two
Questions

a] The first question is; "Was the contract made seriously and deliberately?"

b] There is also a need to verify whether the relationship constituted reasonable

cause.The maker of the note may be allowed to raise the defence of total failure of
consideration, but not partial lack of consideration as something for something.

Every party who becomes a party to a promissory note is deemed to have become a party
for value.

If the note is payable on demand then it is payable on presentation .if it is payable at a

determinable future date or fixed time payment is to be available on the date.

If It is payable on a Sunday or public holiday it will be payable on the next day business day.

Presentment may be on any day after the due date

if upon presentation payment is not made , the payee may use a note in court. A promissory
note which is '' non transferable '' maybe not be regarded as a negotiable instruments.

The defences available to the maker are the same as those in a contract, except the defence
of waiver

Defence of cancellation may also be raised, ie where the note has been torn up , or by
writing '' CANCELLED'' acrossit , or crossing out the maker's signature .

NOTE PAYABLE TO BEARER

These are where the note expressly says so

eg . '' I promise to pay Hilton or bearer ''.

A note payable '' to order 'becomes payable to bearer when the last endorsement on it is
an endorsement in blank.

Maker is the person who makes the note.

Payee is the person in whose name the note is payable.

A payee may negotiate the note by passing it to someone. The reason is that one would
want an immediate benefit rather than wait.
Note can be sold for cash, even at a discount. This is done simply by delivering it. The
liability of the transferor is only to the transferee. This is so because by transferring the
note, one is taken to warrant that the note is what it purports to be , that he has the right to
transfer it and he is not aware of any fact that would make it valueless.

A note may continue to be negotiated. If it is negotiated back to the maker it becomes

discharged if it is due.

The bearer of the note whether he is the original payee or not is known as the holder and is
entitled to sue the owner in his own name .

Since they are not direct parties they are referred to as remote parties . The liability of the
maker will depend on whether the holder is a holder in due course or holder for value or a
holder not for value .The Bills of Exchange Act defines a holder in due course as .

'' one who has taken a note ''

complete and regular on the face of it before it was over due and without notice that it
had previously been dishonoured, if such was the fact . He must have taken it in good
faith and for value and had no notice of any defect in title of the person who negotiated it.

Every holder of the note is presumed to be a holder in due cause unless proved otherwise .
This may be proved through proving fraud or that holder is not a holder in good faith or not
a holder for value .

In Ben Baron 1959 (1) R and N 231 a cheque handed to a person who had authority to sign
for $ 1200 - who signed for $ 4500 said the negotiation of it was affected by fraud .

As against a remote holder in due cause the maker may raise only the two defences ;

(1) lack of contractual capacity in maker

(2) did not know that he was signing a negotiable instrument but was not negligent

(3) forgery or signed by un authorised person

(4) material altercation on the note

(5) lack of presentment for payment

(6) self off or counter claim against holder in due couirse

Priviledges of a holder in due course.

a) a holder in due course has privileges to claim payment even if the note has defects

b) conclusive presumption of a valid delivery by all prior parties

c) date appearing on the note as the true date even if it is not

d) the right to enforce payment even after prior holder has renounced liability provided
he has no knowledge of it

e) the maker is precluded from denying the existance of the payee

HOLDER FOR VALUE

A holder for value is not the same as the holder in due course except that he gave value and
remains undisturbed . All defences raised against a holder in due course may be raised
against a holder for value.

There are however five additional defences against him

These are

1) defects appearing on the face of the note not complete on the face of it.

2) non - transferability [ when note is over due ]

3) waiver .[ takes note subject to defects]

4) cancellation [ previously dishonoured ]

5) prescription

HOLDER NOT FOR VALUE

A holder who gives no value for the note, will not be able to recover unless she can prove
she gave value for it.

AN ACCOMODATION PARTY

A person may make a note without receiving value in order to assist someone to raise funds
. An accomodation party is liable to a holder in due course and a holder for value but not to
holder not for value .

NOTES PAYABLE TO ORDER

An example is '' I promise to pay Anesu or order'' or simply . "I promise to pay Anesu."

this type of note is negotiable but not by mere delivery , it must be made in writing
''Endorsement ''

ordinarily the endorsement is made at the back of the note . the first endosement at the top
etc , across the short side of the note .

Endorsements are not to split the amount

not to be conditional

maybe in blank ie not that is not specifying the name of endoser.

an endorsement in black makes the note payable to bearer

an endorsement may be restrictive eg "Pay Anesu only" or "Pay Anesu or order for
collection."

BILLS OF EXCHANGE

A bill of exchange is defined as an unconditional order in writing addressed by one person

to another , signed by the person giving it , requiring the person to whom it is addressed
to pay on demand or at a fixed or determiable future date a sum certain in money to or to
the order of a specified person or to bearer.

It differs from a promisory note in that it is an order and not a promise.

There are similarities with the promisory note on the essentials , in addition an imperative
order is required not a mere request .

It maybe non transferable or payable to order or bearer.

The drawer may want to drop out of the picture or accept no liability

An acceptor by signing undertakes to pay the bill.

Once a bill has been dishonoured it is no longer neccesary to present it again.

The holder may recover from any party liable on a bill. The drawer who has been compelled
to pay may recover from the acceptor and of course from the drawee, who has accepted
and an endorser who has been forced to pay may recover from the acceptor or from the
drawer or from a prior endorser .

The amount recovable is the amount on the bill and interest and cost of presentment .

Interest is charged when payment has been made in due course i.e at or after maturity , to
the holder in good faith and without notice that title is defective.

A bill may be issued in duplicate or triplicate or more - unlike a note . all copies are treated
as one but should have reference to the others and are numbered.

CHEQUES

A cheque is defined as - a bill of exchange drawn on a banker payable on demand .

It looks like this

 HEAVY'S BANK LIMITED

29th Jan 2015

Pay Sarudzai or bearer the sum of one thousand dollars

$ 1000.00

S. Green

A cheque is a particular type of bill of exchange ,

A drawee is to be a banker , a cheque is payable on demand . a cheque with a post date for
payment is still treated as a cheque .

IN KIRCOS V STANDARD BANK OF SA LTD 1958 R AND 661 - 665 1958 [4] SA 58 60

It was stated that the relationship between a bank and its customer on a current account is
that of debtor and creditor .

The bank undertakes to receive money and collect bills for its customers' accounts. The
bank borrows the proceeds so received and undertakes to repay it to the customer on
demand at the branch of the bank where the Account is kept.

Demand is in the form of a cheque , breach of duty to pay the funds if customer has funds
gives rise to a claim for damages for breach of trust, injury to reputation

businessman or traders credit

- The banker has duty to pay on demand.

The duty does not arise if the cheque is irregularly drawn or ambigious. Officials of a bank
are obliged to know the signatues of their customers.

CROSSED CHEQUES

A crossed cheque bears two traverse lines on the face of it with or without words ''Not
negotiable ''It is to be paid only to a banker , if it is drawn to a banker it must be paid only to
a banker ."

if cheque is addressed two banks the bank may refuse to pay it, unless one of them is an
Agent for collection.
Crossing of a cheque is to give greater security to drawers.

A cheque crossed ''Not negotiable '' gives greater security either generally or specially . such
a cheque is transferable .

When stolen no subsequendt holder is a holder in due course or can acquire a valid right to
it .

A true owner can recover from anyone , who was the possesor at any time between the loss
or theft and payment in good faith, from any person who was the possesor after the theft.

''Account payee'' or ''Account payee only '' are at times added together with words not
negotiable on a crossing - the words '' bearer" are also deleted .

The banker owes a duty of care to the drawer

Adding the word ''Not negotiable ''makes the endorsement ''Special '' and not general .

Crossing is not to be obliterated by anyone.

If a cheque is stolen , noone after that would be a holder in due course .

A true owner may recover from anyone . however innocent, who was a possesor between
its loss and theft .

In Rhostar 1977 [1] RLR 78 , 1977 [2] SA 546 the crossing included words '' acc payee only ''
combined with the words ''Not negotiable'' and the deletion of the words ''Bearer''
rendered the cheque not transferable . banker owed a duty to ensure the payment was to
the correct person .

A general crosing is where there are two traverse lines . A special crossing has in addition
the words' Not negotiable'

THE COLLECTING BANKER

Most individuals and bussiness people receiving cheques , ordinarily bank them .

THE CONTRACT OF AVAL

Some creditors refuse to accept negotiable instruments from anyone unless they are
supported or backed '' by someone else's credit." This type of contract is called a contract of
Aval

The signature of the aval maybe anywhere including as surety and co-principal debtor . The
aval is a surety guaranteeing payment .

The Aval is entitled to the surety's benefits of excussion ie

[1] proceeding first against the principal debtor

[2] division liability only for a rateble propotion if there are co - sureties

CONFLICT OF LAW

Through international trade, foreign bills will be found in Zimbabwe and Zimbabwean bills
are found in other countries . The law of negotiable instruments has been accepted by
almost every country.

As such the validity of a bill is determined by the law of the country where it is used

The interpretaion of contracts is determined by the law of the country where it is accepted

CHAPTER TWO

LOANS AND SECURITIES

Borrowing and lending is an every day part of business . Very few businesses can survive
without borrowing . Bankers and others who lend money require security most of the time.

Security may be defined as anything that puts the lender in a strong position than when he
relies only on borrower's promise to repay

THE UNSECURED LOAN

There is a presumption against donation . If money is paid over to the other then it is
presumed to be a loan , unless there is a romantic attachment to point to the opposite
direction

An agreement for compound interest is permissible, but the amount of interest can
accummulate and equal the capital [ the duplum rule ],but it is not to exceed the capital

COMMERCIAL BANK OF ZIMBABWE V MM BUILDERS AND SUPPLIERS HH 140 - 96

The Money Lending and Rates of Interest Act [ Chapter 14. 14] prohibits the changing of
usurous interest.

Charging of interest under the guise of payment for technical advice is not permissable
WELLS V EAGLE RHODESIAN TOBACCO CO . LTD 1954 S.R 205 AND 1955 [1] SA 385

The charging of interest under the guise of payment for service is not permissable

A sham sale and lease back is affected by the Statute

The rate of interest is also Limited by the Act

WELLS V EAGLE RHODESIA TOBACCO LTD 1954 SR 205 ,1955 [1] SA 385

The court is directed to uncover the nature of the transaction .

Charging interest under the guise of paying for technical service

Charging interest of a raising fee . charging interst under the guise of paying for a service is a
sham sale and lease back to the owner

Hire-purchase agreements are excluded from these provisions.

Interest up to the total capital may be charged , it must however be at the permitted rate .

Interest is not to exceed the capital . the creditor can recover no more than the capital and
interest.

Excessive interest can be recoverd

The intrument of debt is to specify the capital and the interest .

RIGHT OF RETENTION (LIEN)

A right of retention or lien arises out of the operation of law . This emanated from the
principle tht noone be unjustly enriched at the expense of another.

One who has expended money on the property of another is entitled to seek
reimbursement and to retain possesion of the thing until he has been paid in full.

This is to ensure that the owner is not unjustly enriched .

If the possesor has incured neccessry expenses to ensure the property is not destroyed or
does not deteriorate . this is known as the salvage lien

The possesor has a real right in the property against the whole world .

Useful expenses, leading to an improvement in the property leads to improvement lien

which is also valid against the whole world for the amount of the enhancement .

DEBTOR & CREDITOR lIEN

This type of lien is where one has worked for another or incurred an expense on another
property . this type of Lien only gives a personal right against other party
Liens are claimed by those to whom payment is due .

The creditor cannot retain other property other than what he worked on.

The lien is lost once the creditor loses possesion of property and may revive after recovery,
especially if possesion was lost through fraud .

ASSURITY PVT LTD V TRUCK SALES PVT LTD 1960 R & N236 1960 SA 686

The M.O.C through a writ attached the property . an application for restoration was
granted to revive the Lien . if surrender of property is voluntary the Lien is extinguished .

A Lien maybe held over an immovable property . The control however must be actual, not
symbolic.

SURETYSHIP OR GUARANTEE

A third party guarantees to pay off the creditor in the event that the debtor fails to do so.

The creditor is given additional security that the debt will be paid off.

The right in suretyship are not real rights unlike in mortgage , pledge and some rights of
retention.

There must be a principal debtor and a principal obligation.

The obligation need not be to pay money but may be to perform an act although the
majority are.

If the principal contract is void , the suretyship is also void .

The creditor may cede his rights to a third party to whom the surety is then bound .

A suretyship obligation may not be ceded to more than one person .

No formalities are required for suretyship contracts .

If one signs a suretyship agreement in blank one is bound .

The surety is discharged when the debt is paid off.

Extensions of time to pay does not release the surety .

The surety is entitled to some benefits.

BENEFIT OF EXCCUSSION

A Surety can demand that before the creditor proceeds against him he must first sue the
principal debtor. That means obtaining judgement and exercuting against him .
If a surety renounces excussion he will not benefit from it , this is so where the surety is also
a co-principal debtor .

THE BENEFIT OF DIVISION

Where there are co-sureties, each would be limited to a proportion of the debt . If the
benefit is anounced each of the sureties would be liable for the whole amount .

BENEFIT OF CESSION OF ACTIONS

The creditors claim is delayed until the creditor has ceded any claims against the debtor , if
it is renounce the surety will not be able to raise a dilatory plea

The surety may raise defences against any claims for example a deffence that the contract is
contract void.

- May raise any defence that is open to the debtor.

- He many clain to be wholly or partially discharged.

Surety may claim against the principal debtor and against co-sureties .

LIQUID DOCUMENT

Examples of liquid documents are promisory notes , bills of exchange and cheques and
I.O.Us. The amount of the debt owing is shown on the face of the document . There is no
need to calculate or asses it. Negotiable instruments prescribe after six 6 years unlike
ordinary debts whch prescribe after three years .

LIQUIDATED DOCUMENT

The is a document where the amount that is owing is easily calculated for example from an
invoice, a contract etc

PLEDGE

A pledge is where a creditor asks the debtor to surrender to him some movable property as
security for a loan . There must be an agreement that it be held by the pledgee as security
and it is delivered to him. The pledge must be in effective control . Delivery of the property
need not to be immedeatly .

Possesion by the pledgee strengthen his position.

The pledgee has a duty to take care of the pledged property. Expenditure that is incurred in
looking after it is recovable.

Fruits or profits are credited to the pledger . An agreement to sell the pledged property
without an order of court order is lawful. In the absence of, agreement the pledgee has to
obtain an order of the court and execute.

NOTARIAL BOND

This is used where the only security is movable property which the debtor wishes to use.

A notatial bond over the movable property then is used .

It must be notarially excuted and registered with the deeds office within three months. I If
it is not registered it is invalid .

It attaches to the movable property concerned .

The creditor is given a preference in the case of the debtor's insolvency.

Once the debt is paid the debtor is entitled to its cancellation.

MORTGAGE BOND

This is a special mortgage of immovable property . It covers land and buildings . Ownership
of land in this country is registered with the Deeds Registry in Harare and Bulawayo.

A mortage bond is drawn up by a conveyancer and registered with the Registrar of Deeds .

Mere delivery of title Deeds does not create a mortage bond.

A registered long lease may be mortgaged , Mortgage bonds are mainly used by the building
societies and banks when they assist to fund the acquisition of property land . it binds
specific immovable property . It does not bind movable property .

The mortagagee's advantages are therefore

_ fore closure and protect the property

_ call up the bond

_ have the property sold to recover a debt

PROTECTION OF PROPERTY
The registration of the mortgage bond with the deeds ofice . prohibits transfer of it to
anyone without the mortgagee's consent except in insolvency , execution .

assignment or liquidation but in all instances , he is a protected creditor .

May apply for a reserve price to be fixed if it is to be sold in excution.

May interdict mortgagor from registering a servicude on the property.

RIGHT TO CALL UP OR FORE-CLOSE

If the mortgagor breaches any terms of the contract , the mortgagee will be entitled to
foreclose , This may be enforced because of the failure to insure the property . Judgement is
obtained for the amount owing and declaring the property executable and selling it in
execution. Property not to be sold without an order of court . Mortgagor is to be notified .

The sale is to be by public auction without reserve , Mortgagor needs to attend .

If the bidding does not amount to the amount owing , mortgagee may buy it

If there are more than one mortgagees all are to consent to any sale of the property.

Mortgage is the soundest of all security

WEAKNESSES

A mortgage bond passed by a forged power of attoney is false .

The debt secured by a mortgage bond prescibes after 30 years . it then falls away if there
has neen no interruption.

CHAPTER THREE

PARTNERSHIPS

DEFINITION

RHODESIA RAILWAYS & ORS V COMMISSIONEROF TAXES 1925 AD 438 AT 465 . Laid down
the definition of a partnership as follows:

"First, each of the partners brings something into the partnership, or binds himself to
bringing something into it , whether it be money , labour or skill . the second essential is
that the business must be carried on for the benefit of both parties . third is the object
should be to make profit. finally the contract between the parties should be legitimate A A
contract where these four requirements are present, in the absence of something showing
that the contract between the parties is not an agreement of partnership , the court must
come to the conclusion that it is a partnership . It makes no difference what the parties have
chosen to call it , whether they call it a joint venture or letting and hiring . the court has to
decide on the real agreement between them is.Recourse has to be had to the substance of
the agreement at all times, no one factor is conclusive .

A partnership is not a separate personality from its members although for purposes of
insolvency it acquires that personality.

The minimum number of partners is two. The maximum number of partners is twenty,
Companies Act. Some professionals are permitted more than twenty members, for example
Accountants. Most professions prohibits the formation of partnership with unqualified
people, e.g., Lawyers

A company may be a partner.

Partners contribution is not always measured in money’s worth.

A business has to be carried on.

Co-ownership is not the same as partnership. With a partnership it is necessary that there
be some form of activity, not just the receipt of fruits [rent]

A partnership formed for purposes of transacting one venture is a partnership

Universal partnership is permissible

Partners retain their individual statuses and estates

The second type of universal partnership is where partners draw no distinction between
there business and private lives and own everything is common.

A partnership is created expressly except that of spouses.

A tacit universal partnership may be created by a man and woman living together.

The object must be to make profit and share it. This means net profit and not gross
proceeds.

Partners must intend to become each other's agent.

A partnership must be formed for a lawful purpose. If the purpose is unlawful then it is not a
partnership. Sharing profits is the main test of the partnership but it is not the only test.

The other test is whether the partners would like to be each other’s agents.

FORMATION
MOST partnerships are entered into by agreement. The agreement can be express or
implied. A partnership may be inferred from the conduct of the parties. An express
agreement may be in writing or oral.

RELATIONSHIP BETWEEN PARTNERS AND THIRD PARTIES.

Each partner is the agent of the other partners. The acts of a partner are binding not only on
himself but on the other partners. To affix liability the third party must prove three things
which are:

a] A partnership exists [ or deemed to exist ]

b] Partner acted with the scope of his authority.

c] Acted in his capacity as a partner

It may suffice for a third party to show that the person held himself out as a partner.

The third party acted on it on the basis that the partner was one, to his prejudice.

Proof has to be given as well of the fact that, he had authority to transact in the way that he
did. Implied authority may be enough.

Ostensible authority means authority by holding out. A partner to have acted in his capacity
as a partner

Partners are also liable on the principle of agency. Partners are jointly and severally liable to
third parties for the obligations of the partnership if it still exists. Third parties are to sue the
partnership as a whole.

A 3rd party may not rely on ostensible partnership if he knew that the partner had no
authority. There is need for a 3rd party to prove that the partner acted as a partner and not
simply on his own behalf.

If the partner declares the capacity he acts on the matter is simple.

Partners are liable both in contract and delict.

A third party who gets a judgement against a partnership must execute against the
partnership property first and if the proceeds are not enough against the individual
partners' property.

A judgement against an individual partner does not entitle, a third party to proceed against
the partnership but may obtain an order attaching the partner' interest in the partnership

Any partner may represent the partnership in legal proceedings, but not for any fee or
reward
A third party may prove that a partnership exists.

The third party must also prove that the partner was acting within the scope of his authority
- authority may be express , implied or ostensible

The partner's liability may arise out of contract , principle of agency and agency

Liability of partners is joint and several

People have the tendency to want to limit their liability. This can be obtained from public
and private companies.

Some partners may require limited liability. This can be in two scenarios that is the
anonymous or en-commandite.

An anonymous partner is a dormant partner; his liability is the full share of any losses
incurred. The Dormant partner is not liable to 3rd parties

En-commandite is liable to his partners for a fixed sum he has agreed to contribute.

IN SIEGEL & FRANKEL V R 1943 SR 13 15

Although he may be described as a partner the essence of the management is that this fact
must be carefully cancealed from the outside world. At common law, he had no right to
interfer in the bussiness or claim posesion of assets whilst the partnership is in existence. In
the event of an insolvency he cannot claim his capital until creditors have been paid. The
creditors do not look to him for payment since he was unknown to them. And they do not
contract on the footing that he should be liable together with the known partners.

It is essential for the anonymous partner that he must not be held out to the public as a
partner. If this anonymity is destroyed he will become an ordinary partner, at any rate to
Loyalty and Good Faith

Each partner must act in good faith toward the other partners and must not
take any advantage over the other partners by misrepresentation or
concealment. Each partner owes a duty of loyalty to the partnership, and this
duty bars the making of any secret profit at the expense of the firm and bars
the use of the firm’s property for personal benefit. A partner cannot promote a
competing business, and if he does so, he can be liable for any damages
sustained by the partnership.

Obedience

Partners must observe any limitations adopted by a majority of the partners

with regard to the ordinary details of the partnership business. For example, if
a majority of the partners operate a retail store and decide that no sales can
be made on credit, a partner placed in charge of the store must obey this
limitation. If a third person does not know of the limitation, the managing
partner will have the power to make a binding sale on credit to such a person,
but if the third person does not pay his bill, the partner who violated the
limitation is liable for any loss caused by his disobedience to the limitation.

Reasonable Care

A partner must use reasonable care in transacting the partnership’s business

and is liable for any loss resulting from a failure to act with reasonable care.

Information

A partner has the duty to inform the partnership of all matters relevant to the
partnership. For example, if one partner is going to buy out the interest of
another partner, this must be revealed to the partnership.

Management

Each partner has the right to take an equal part in transacting the business of
the partnership. It is irrelevant that one partner contributed more than another
financially or that one contributed only services when the partnership was
formed.

Inspection of Books

All partners are equally entitled to inspect the books of the partnership.

Share of Profits

Each partner is entitled to a share of the profits. The partners may provide
that profits shall be shared in unequal proportions. However, in the absence
of such an agreement, each partner is entitled to an equal share of the profits
without regard to the amount of capital or services contributed to the
partnership by each partner.

Compensation

In the absence of an agreement to the contrary, a partner is not entitled to

compensation for services performed for the partnership. Partners may agree
that one of the partners shall devote full time as manager of the business and
may agree that a salary shall be paid to the partner in addition to the
managing partner’s share of the profits. This sometimes occurs in legal
partnerships or accounting partnerships when one of the partners is appointed
managing partner. In most cases, the managing partner practices his
profession, but also handles the business affairs of the partnership and is paid
or compensated in some way for this extra duty.

Repayment of Loans

A partner is entitled to reimbursement of money advanced to the partnership,

such as travel expenses incurred on partnership business.
Contribution and Indemnity

If a partner pays more than his proportionate share of the debts of the
partnership, he has a right to reimbursement from the other partners. If an
employee of a partnership negligently injures a third person while acting within
the scope of employment, and if the injured party collects damages from one
partner, this partner is entitled to reimbursement from the other partners in
order to divide the loss equally.

Distribution of Capital

If a partnership is dissolved, every partner is entitled to receive a share of the

partnership property after due payment of all creditors and the repayment of
loans made to the partnership by the partners. Unless otherwise stated in the
partnership agreement, all partners are entitled to the return of their capital
contributions to the partnership.

Nature and Extent of Partner’s Liability

Partners are jointly and severally liable for all torts committed by one of the
partners in the scope of the partnership business. When partners are held to
be liable for an injury caused to a third person, the third person may sue all or
any of the members of the partnership. Partners are also jointly and severally
liable on all partnership contracts.

Each member of a partnership has individual and unlimited liability for the
debts of the partnership regardless of the member’s investment or interest in
the partnership. Even if a partner only owns 5% interest in the partnership, a
judgment against the partnership in the amount of $100,000.00 can be
collected from the 5% owner’s personal assets, particularly if the partnership
or the other partners did not have the money to pay this debt.

Liability for Breach of Duty

If a partner breaches a duty to the partnership, an injured partner may recover

damages from the partner who breached the duty.

Liability of New
Partners

A person admitted as a partner into an existing partnership has limited liability

for all obligations of the partnership which arose before he was admitted as a
partner. This type of claim could only be satisfied out of partnership property
and would not extend to the individual property of a newly-admitted partner.

Effect of Dissolution on Partners’ Liability

A partner will remain liable after dissolution of the partnership unless all claims
against the partnership have been paid or the creditors of the partnership
have released their claims. The dissolution of the partnership does not in and
of itself discharge the existing liability of any partner.

Inside Duties of Partners

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the creditors of the partnership .

THE RELATIONSHIP BETWEEN PARTNERS

The relationship between partners is very much the same as the relationship between
brothers. Partners must display ut-most good faith. It must be remembered in all dealings.
The same requirement is needed in insurance contracts. It countinues until partnership
issues are settled and wound up.

A partner is not allowed to make a secret profit or any profit as a reslt of overreaching his
partners [ even in a manner that is permissable between strangers ] It is not permissable for
a partner to compete with the partnership.

A partner has to account to the partnership.

A partner is forbiden from acquiring in his own name property meant for the partnership or
to use secrets obtained through the partnership for his own benefit .

A partner has to account for secret benefits

A partner who bought land in his own name which was meant for the partnership and sold it
for his own benefit was made to account in WEINMAN V JOYNER 1971 [2] RLR 116

IN MARAIS V KENNEDY H.H 149 - 96 A partner who sold a partnership assets at a profit but
did not disclose to the partner was liable for damages .

A contract in breach of the duty of the ut-most good faith with a third party is
unenforceable as contra bonos mores that means contrary to good morals and may entitle
the other partners to dissolve the partnership.

PARTNERSHIP PROPERTY

A partner has a duty to contribute something to the partnership. If he fails to do so, he may
be sued.

Upon dissolution a partner has to get his contribution.

Partners own the partnership property jointly.

They share profits and losses in the propotion of the capital.

Sometimes they get equal shares.

MANAGEMENT OF BUSSINESS
This may be specified in writing.If not specified all partners are entitled to manage and full
access of partnership property.

Salaries may be specified, if there is no mention then no salary may be drawn.

Expenses incurred in partnership work may be compensated. If one parter works more than
what is provided by agreement may be rewarded by remuneration.

A dormant partner may inspect the business.

Prosper accounts are to be kept

- Access to accounts

- May copy accounts.

-He is entitled to explanations.

-Inspection can be by an agent.

-He is to exercise reasonable care and diligence.

Partners are to be unscrupulously honest.

Partners are liable for failure to exercise due care.

Personal property is to be kept separate from partnership property.

Private use of partnership property is not permitted.

LEGAL PROCEEDINGS BETWEEN PARTNERS

Partners may sue each other even during the currency of the partnership or after
dissolution.

If the action concerns the partnership it will depend on whether there has been a final
settlement.

A partner may be sued for specific performance of an agreement during the partnership.

A partner can be sued for personal obligations.

Interdicts can be granted.

TERMINATION OF PARTNERSHIP

The termination of a partnership can be friendly or unfriendly.

Dissolution - is the breaking up by court. It is also referred to as liquidation of a partnership.

Dissolution

Partners may agree to dissolve a partnership for example if it was formed for a fixed period,
or indefinite period, by mutual agreement.

Where mutual agreement is not specifically required it is known as a partnership at will.

Unilateral notice may be given.

The death of a partner dissolves the partnership.

A partnership is also dissolved when a new partner is admitted.

A partnership may be dissolved by operation of law, for example if one of the partners
becomes an enemy of the State. [Enemy alien]

DISSOLUTION BY COURT

The Court may dissolve a partnership on the request of a partner.

This may be for the following reasons.

a] Mental illness of a partner.

b] Incapacity through illness.

c] A partner's conduct prejudicing the partnership, destroying mutual trust eg starting

another business similar to the partnership business in competition.

d] Adultery with the others wife

Salter v Hawkins 1914 TPD 264

e] Fundamental breach of partners’ duties, such as illegal expropriation of profits to himself.

f] Impossibility to make a profit.

g] When it is just and equitable - quarrels and loss of confidence

CONSEQUENCES OF DISSOLUTION

The right to bind the partnership ends. - Rights and duties also end. Partners are to finish all
transactions begun and pending.
All partners to access partnership books. Creditors then sue partners individually.
Dissolution of partnership is to be publicised.

WINDING UP OF PARTNERSHIP

Dissolution is followed by winding up.

This is to complete all transactions.

Pay all creditors and receive money from all the debtors.

Distribution of assets to partners follows.

Liquidation is involved of which one of the partners takes the role Liquidator.

The court may a appoint liquidator.

A receiver and manager maybe appointed by the Court.

A liquidator may sue or be sued.

Goodwill is to be sold for the benefit of all the partners

THE RULES APPLICABLE ARE THESE:

Loses and deficiencies are paid out first out of profits, next out of capital and lastly by the
partners.

Assets are applied in the following order;

1] Pay creditors.

2] Pay to partners what is due from rateable advances.

3] Pay what is due tothe partners’ capital.

4] Residue divided [dividend] is paid in the ratio of profits.

CHAPTER FOUR

THE LAW OF DELICT

A delict is a civil wrong as opposed to a crime which is a crime against the state . Civil
wrongs are wrongs against individuals or juristic persons. A juristic person can be in the
form of private or public companies or universities which have a separate legal personality
from its members. The state is not very much involved in civil cases . It only provides a
platform for the remedying of the wrongs in the form of courts of law. An injured party may
seek redress at the courts.
On the other hand the state through its machinery takes an active party in the criminal
proceedings through the Zimbabwe Rebublic Police, Prosecutor General and Public
Prosecutors. The complainant in a criminal case is regarded merely as a witness. The
complainant is represented by the state, against the accused the (wrong doer). The accused
person in the criminal trial is the person who has commited the offence .

The main aim of civil proceedings is mainly compernsation and the object of criminal trial is
to punish the offender. Liability in a civil case arises out of the wrongful conduct of another.

In a criminal case liability also arises from wrongful and unlawful conduct .

Parties to a civil wrong are;

Plaintiff who is the complainant.

Defendant who is the wrongdoer.

Where as parties to a criminal the matter are the;

The State, meaning the Government which represents the complainant.

Accused who is the wrongdoer.

The platform is provided by the state in the form of the courts of law.

# NB - certain types of delicts also constitute crimes for example assault.

A breach of contract may give a rise to a claim for compensation of damages as in civil
wrongs .

The difference between a breach of contract and a civil wrong is that breach of contract
arises out of a contract meaning (agreement) . For a civil wrong to arise there need not be a
contract although sometimes it may be so . Civil wrongs can arise even between complete
strangers.

In both breach of contract and civil wrongs the proceedings at court , are referred to as civil
proceedings . This is distict from crimes where the proceedings are called criminal
proceedings.

THE ROLE OF FAULT

Generally for one to be liable in delict it has to be proved that he was at fault .

Fault in delict arise from intention to injure someone or when the wrong doer is negligent .

In some instances fault can be attributed to a persoen when there is no intention and no
negligence. In that case the principal of strict liability applies.
INTENTION

The requirement for intention is that the wrongdoer must have intended to cause the injury
or damage. It means the wrong doer sets out to act in a manner that causes the results.

It can be said the wrong doer willed the result . The subjective test is used here. Every
person is presumed to will /intend the results of his conduct. By the subjective test is meant
the law looks at the individual concerned and examines her conduct. This is to see if indeed
she intended the result or consequence. If intention can not be proved where it is needed
the defendant will not be liable.

NEGLIGENCE

Negligence entails a failure to measure up to the standard of a reasonable person and

thereby cause damage. Here the objective test is used . This is an instance , where the
wrong doer fails to measure up to the standards of a reasonable man and there by cause
injury or damage to the person of another or propety. An example is if the driver of a motor
vehicle drives the motor vehicle negligently and kills or injures pedestrians.

STRICT LIABILITY

Strict liability as the necessary fault arises if in the circumstance the wrongfulness of
conduct does not require that there be intention or negligence.

These are usually instances where the statutes say so or where the occurence is preceeded
by positive or negative conduct.

Examples are:

Keeping wild animals which causes damages to property or injuries to persons, or allowing
domestic animals suchas cattle ,goats and sheep to get astray and damaging other peoples
property, or keeping ferocious dogs which bute passersby. Dogs espcially are regarded as
generally violent. If a person is bitten by a dog it is said the dog has behaved in a usual way.
Anyone who keeps these animals is strictly liable for the delicts caused whether or not he
was at fault, that means regardless of intention or negligence.

Keeping

Bees

Dogs

LIons

Monkeys

Cattle
Goats

Sheep

Which causes harm to the property or to the person of another is a delict.

WRONGFUL ACT OR OMISSION

A wrongful Act or Omistion is a requirement .

A wrongful act entails a positive act or an omisstion .

All harm caused culpably [ intentionaly or negletingly] is actionable

A positive act may cause injury. Liability for omissions arises only if the wrong doer had a
duty to act .

In Zimbabwe the law does not require one to go out of their way in order to save someone
who requires help , unless in the following circumstances:

1] Protective relationship (Father and son-daughter) (mother and her children) (teacher
and pupil)

2] Statutory or legal requirement

3] When prior conduct has created a dangerous situation.

POSITIVE ACT OR CONDUCT CAUSING INJURY

Fault is a necessary requirement in delict. Fault can be in the form of INTENTION,

NEGLIGENCE, AND STRICT LIABILITY.

THE ONUS OF PROOF

The law is that he who avers (accuse) must prove her case.

Usually the Plaintiff must prove his case. This is done by giving evidence and producing
exhibits if necessary and calling witnesses.

QUANTUM OF PROOF

In civil cases the quantum of proof required is on a balance of probabilities . This is unlike in
criminal trials where the state has to prove its case beyond the reasonable doubt.

DEFENSES TO CIVIL WRONGS

CONSENT
Consent is a full defence

He who consents cannot be heard to say otherwise .

STATUTORY AUTHORITY JUSTIFICATION

A statute (Act oF Parliament) may authorise the commision of what may be considered a
civil wrong for example the police may use reasonable force to arrest one who is running
away or resisting arrest.

Ministry of Agriculture officials are authorised to kill stray cattle affected by foot and mouth
or dogs with rabbies.

NECESSITY

It is some times necessary to act in a way that injures another.

SELF DEFENCE,

Every person is entitled to defend himself against the aggression of others and may use
force to do so.

DEFENCE OF OTHERS

A person may cause injury when defending others.

DEFENCE OF PROPERTY

A person is entitled to defend her property.

PROVOCATION

Provocation is a partial defence to delicts such as assault.

YOUTHFULNESS

Children under the age of seven are incapable of committing delicts. They are presumed to
be irrrebutably incapable of commiting any wrongs civil or criminal.It means no evidence
can be adduced to disprove this. The presumption is rebuttable for children who are
between seven and fourteen. Children who are between fourteen years of age and eighteen
years are liable in delict.

VICARIOUS LIABILITY

In most circumstances individuals are responsible for all consequences arising from a
wrongful act or conduct. Noone can be blamed for the wrongs of another.
However if a wrong is commited by an employee during the course and scope of his
employment the employer is said to be vicariously liable for the wrongs of the employee.

An employment situation arises if one person is employed by another on a full time or part-
time basis. Sometimes it is difficult to distinguish an employer/ employee and employer and
independent contractor.

Ordinarily an employer pays wages or a salary to the employee weekly or monthly.

The employer direcctly supervises the work of an employee.

The employer has a duty to give the employee work.

The contract of employment can be for a fixed period or an indefinite period.

Conditions of service are to be provided.

A contract of employment can be terminated by mutual agreement between the parties or

by the employer for misconduct or by the employee on resignation or retirement.

The employer independent/contractor relationship is usually for the performance of a

certain contract. Once the object is fulfilled the contract terminates. An independent
contractor is not entitled to wages/salary but to the contracted amount which is payable as
agreed by the parties. An example is that of Construction companies engaged to construct
buildings.

What does it mean to say an employee was acting within the course and scope of his
employment?

In simple terms it means the employee must have been doing the work he was employed to
do. He must not be deviating from what he is authorised to do.

The deviation must be a serious deviation for it to be said the employee was on a frolic of
his own. Such an employee must be acting within the scope of his employment. If a worker
goes out of his way to do acts which are not authorised by the employer he can be said to
be in a frolic of his own. In those circumstances the employer will not be liable for the
employee's delicts. It must be a total departure from what is authorised. An employee who
does his work in an unauthorised way will be said to be acting within the course and scope
of his work. For example if the driver of a bus allows an unlicenced person to drive the bus.
if a collision results the employee is liable and the employer is vicariously liable. If the driver
deviates from his route marginally and causes damage the driver is liable and the employer
is vicariously liable. If the employee is on a frolic of his own he will be acting out of the
scope of his employment. For instance if an employee who is authorised to drive a bus
during the week days steals the vehicle over the week-end to go on his own errands, he is
liable for all the consequences. The employer is not vicariously liable.
The relationship must be strictly that of the employer and employee.

An employer is not responsible for the conduct of an independent contractor.