Sellers Duty To Disclose

The case of *Agricultural Finance Corporation v Lengetia Ltd & Jack Mwangi* establishes that even where a third party (AFC) is the expected payer, they are not liable on the contract for costs/interest if they were not a formal contracting party. Which statement best reflects the policy reason why the law adheres to the Privity rule by denying a remedy to Lengetia Ltd. against AFC? Question 12Answer a. It discourages the formation of commercial agreements that lack clear documentation of the contractual parties. b. It protects the individual liberty of A (AFC) by ensuring they are not subject to a contract to which they did not consent. c. It upholds the principle that contracts must always be strictly documented under seal to be enforceable. d. It prevents the court from engaging in 'legal gymnastics' to create an inconsistent body of law.

In the context of misrepresentation, the distinction between a statement of fact and a statement of opinion is crucial. When is a statement of opinion most likely to be treated as a misrepresentation of fact? Question 13Answer a. When the maker of the statement holds a genuine, though mistaken, belief in their opinion. b. When the opinion is based on facts that are in the future and thus speculative. c. When the maker has or professes to have special skill or knowledge, implying the opinion is based on objective, justifiable facts. d. When the statement is made by a party who has no better knowledge of the subject matter than the recipient.

A buyer purchases a machine for Ksh *,* based on the seller's statement that it produces * units/hour. The statement was negligent, and the machine only produces * units/hour, worth Ksh *,* at the time of sale. The buyer's subsequent operating losses amount to Ksh *,*. Which measure of damages is appropriate for the negligent misrepresentation? Question 14Answer a. Ksh *,*, representing the consequential losses (operating losses) which were reasonably foreseeable. b. Ksh *,*, representing the loss of the bargain (value as represented minus actual value). c. Ksh *,*, representing the difference between the price paid and the actual value, plus the consequential losses, provided the total loss was reasonably foreseeable. d. Ksh *,*, representing the full purchase price, which must be returned as indemnity.

A contract requires A to deliver exactly * tonnes of sugar to B. A delivers * tonnes. Under the strict rules governing performance, what right does B have, and what is the legal basis for that right? Question 15Answer a. B has the right to reject the entire * tonnes, based on the precision rule of exact performance. b. B must accept the contracted * tonnes, but can sue A for damages for the excess * tonnes. c. B must accept the whole * tonnes but is entitled to a *quantum meruit* reduction for the extra quantity. d. B has the right to accept the whole * tonnes but must pay for the extra * tonnes at the contract rate.

A builder (A) is contracted to build a wall on the client's (P's) land for a lump sum. A completes *% of the wall and then abandons the site. P is forced to complete the wall himself. P refuses to pay A for the work completed. A sues for *quantum meruit*. Why is A unlikely to succeed in recovering payment? Question 16Answer a. The acceptance of the partially completed work was involuntary, as P had no option but to keep the work done on the land. b. The contract was not divisible, so A failed to meet the condition precedent for any payment. c. A's abandonment was a fundamental breach, discharging the contract and any rights A had. d. The doctrine of substantial performance fully compensated P, nullifying A's claim.

A buyer (B) and a seller (S) enter into a contract where S is to deliver * bags of coffee on * October, and B is to pay the price on * October. Before * October, they orally agree to cancel the contract entirely. Which of the following is the valid legal reason for this cancellation to be effective? Question 17Answer a. It is a bilateral discharge because each party provides consideration by releasing the other from their executory obligations. b. It is a unilateral discharge supported by the doctrine of promissory estoppel. c. It is ineffective because there is no accord and satisfaction, as no new consideration was provided. d. The oral agreement is ineffective because the original contract was for the sale of goods and required written evidence for discharge.

A contracting party (P) who was fraudulently induced into a contract may seek rescission. Rescission is, however, an equitable remedy subject to certain bars. Which statement correctly identifies a circumstance in which P's right to rescind for fraudulent misrepresentation would be lost? Question 18Answer a. The property acquired under the contract has slightly depreciated in value due to market conditions. b. P, upon discovering the fraud, promptly attempts to affirm the contract by utilizing the property in a way that is inconsistent with the seller's retained ownership. c. The property has been sold by the fraudulent party to an innocent third party who purchased it on credit. d. P had an opportunity to inspect the property before contracting but failed to do so, thus acting negligently.

A debt can be assigned by a creditor (Assignor, X) to a third party (Assignee, Z) who can then sue the debtor (Y) directly. This transfer is generally an exception to the privity rule. Which of the following rights is NOT assignable under the common law principles applicable in Kenya? Question 19Answer a. The fruits of litigation where the transfer reflects financial aid to bring the action (champerty). b. The right to recover a non-liquidated debt after obtaining a court judgment. c. The interest in a trust fund (an equitable chose in action). d. A debt which is due to the assignor after a contract has been fully executed.

The maxim *in pari delicto potior est conditio defendentis* (where both are equally at fault, the defendant is in the stronger position) applies to illegal contracts. However, the less blameworthy party may still recover property or money. This recovery is typically allowed when: Question 20Answer a. The illegal contract has been substantially performed, but a minor part remains executory. b. The claimant can establish a valid proprietary right without having to rely on or plead the underlying illegal transaction. c. The claimant repents after the illegal purpose has been fully carried out but before the defendant has spent the money. d. The illegality of the contract was explicitly stated in the formation documents.