BUSINESS LAW

Question 1

What is arbitration and what are its advantages and disadvantages?

Answer 1

Arbitration is an alternative method of conflict resolution done out of court. Here parties involved in a conflict employ the help of third parties called arbitrators, and at the end of the case, the arbitrators give the decision called an arbitration award which all the parties must follow.

Advantages of arbitration include:

-> Parties get to choose their arbitrators, this is not possible with litigation
-> Parties get to choose the language they are judged in
-> The process is private and away from the public
-> Arbitration awards are easier to enforce
-> Arbitration is cheaper and less time-consuming than litigation.

The disadvantages include:
-> There is no possibility for an appeal
-> The arbitrators might not be qualified enough for the case
-> The arbitral award is not binding on the parties
-> The arbitrators cannot directly enforce the arbitral awards
-> One party with powerful lawyers can subject the case to a lot of pressure

Question 2

What are negotiable instruments and what makes something a negotiable instrument?

Answer 2

A negotiable instrument is a written document or paper instrument that is used as a substitute for money, or as a way of extending credit e.g a cheque and promissory note respectively

There are certain requirements for something to be called a negotiable instrument

1. Signature:
   It must contain the signature of the one establishing it otherwise known as the drawer
2. Fixed Amount:
   The amount it represents must be fixed it can not be ambiguous or vague
3. Unconditionality:
   There can not be conditions attached to cashing it out or using it
4. Time specificity:
   Unless it is to be paid on demand the negotiable instrument must have a fixed time for its payment

Question 3

What are some reasons that could justify the annulation of a contract?

Answer 3

Contracts can be annulled or discharged for various reasons some of these reasons include(BMI IT)

1. Breach of Contract:
   If one or both parties breach the contract, then the contract can be annulled this can happen for 3 main reasons: non-performance, incomplete performance or deviation from the terms laid out in the contract
2. Mutual Agreement:
   Contracts can be annulled if both parties agree to it. This could be because of a change of circumstances, change of priority or the contract could no longer be beneficial to both parties
3. Impossibility:
   If one or both parties cannot fulfill the terms in the contract because it is now impossible then the contract can be annulled, this can be because of reasons beyond them, or unforeseen circumstances.
4. Illegality:
   If activities that were legal before the contract and are involved in the contract, were to become illegal because of law changes then the contract would have to be annulled as it is no longer enforced by law
5. Termination clause:
   Contracts usually contain a termination clause, that specifies the procedures or conditions for a contract to be annulled, it these conditions were to be met then the contract will be annulled

Question 4

“Certain characteristics are peculiar to insurance contracts which are not found in ordinary contract law” Asses the veracity of this statement.

Answer 4

To assess the truth behind this statement, we must first assess the principles behind insurance contracts that make them different from ordinary contracts [S(UI)^2]

1. Subrogation: It is a principle behind insurance contracts that allows the insurer to step into the shoes of the insured and pursue legal action against a third party responsible for damages
2. Utmost Good faith: This is a principle that requires the insured and the insurer to provide all material information that has to do with the risk to be covered
3. Utmost Good faith in claims handling: This is a principle that requires the insured to provide factual and timely information when making claims
4. Indemnity: This principle requires the insured to be paid the full amount of what is needed to cover the loss he/she has suffered
5. Insurable Interest: This is a principle that requires the insured to have a legal or financial interest in the property to be insured