EASTERN AND SOUTHERN MANAGEMENT INSTITUTE

(ESAMI)
EXECUTIVE MBA PROGRAMME BUSINESS AND COMPANY LAW

LB 502 - PROJECT
PROJECT TOPIC: 1.0 Discuss the relevance of English, Indian and foreign laws in Tanzania and comment on the assertion that Tanzanian law has a peculiarity in the region of codifying large chunks of the common law relating to commercial law. 2.0 Outline shortcomings in business and company law of Tanzania suggesting possible reforms.
SUPERVISORS NAME: Dr. Mtambo J. Prepared by: FRED RAPHAEL Reg. No. 19EDA10107

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INTRODUCTION
Common law refers to law and the corresponding legal system developed through decisions of courts and similar tribunals, rather than through legislative statutes or executive action. It is the traditional unwritten law of England, based on custom and usage, which began to develop over a thousand years before the founding of the United States. The best of the pre-Saxon compendiums of the common law was reportedly written by a woman, Queen Martia, wife of a king of a small English kingdom. Together with a book on the "law of the monarchy" by a Duke of Cornwall, Queen Martia's work was translated into the emerging English language by King Alfred (849-899 A.D.). When William the Conqueror invaded England in 1066, he combined the best of this Anglo-Saxon law with Norman law, which resulted in the English common law, much of which was by custom and precedent rather than by written code. By the 14th century legal decisions and commentaries on the common law began providing precedents for the courts and lawyers to follow. It did not include the so-called law of equity (chancery), which came from the royal power to order or prohibit specific acts. The common law became the basic law of most states due to the Commentaries on the Laws of England, completed by Sir William Blackstone in 1769, which became every American lawyer's bible. Today almost all common law has been enacted into statutes with modern variations by all the states except Louisiana, which is still influenced by the Napoleonic Code. In some states the principles of Common Law are so basic they are applied without reference to statute. The law system practiced in Tanganyika was based on customary laws which were native laws regulated peoples interactions in different Page 2

matters. The recognition of customary law was verified by the Tanganyika order council of 1920. Section 13(4) required the governor when making ordinances to respect the exiting native laws provided they were not opposed to justice and morality. The colonial domination in Tanganyika, the British colonialist introduced British oriented laws which came to be known as ordinances. The British introduced common laws which were termed as received laws prior to the reception date. After independence amendments were made by the parliament of the United Republic of Tanzania and Zanzibar whereby the parliament were allowed t make law as per the constitution of United republic of Tanzania. English, Indian & foreign law are very important to Tanzania because United republic of Tanzania has been following foreign laws since the colonialisation period. By making use of foreign laws has gained enough experience from experienced legal structures like Britain. Form Britain Tanzania has learned so much that our legal system takes after the English legal system which is older; legal practitioners, law courts etc are more experienced both in colonial and post colonial period English laws have been very much important. It has also termed in one of the section in Tanzania laws that, if any case is unable to be solved by Tanzania law, then we should refer to common laws. Therefore Applying common law in matters which are not locally provided for by our law saves time since the principles have in common law been aptly established. Applying is simpler than reformulating new principles. Page 3

Generally common laws are still relevant in every aspect of business since more principles are abound in its body than in our local law The adopted business laws from English laws had been extremely used during the colonial era and have been used up to present with and without any significant modifications despite the fact that the same statutes have been changed in the countries at their origin. Most of these laws are used up to present. Any law that can be referred to as an ordinance was enacted by the colonialists for every legislation that came after independence was named an ACT. The tendency has been so until in 2002 when there was found to be a need for uniformity in the naming of all the codes in Tanzania, Instances of the business laws that have been adopted include but not limited to: From England: 1. The Sale of Goods Ordinance Cap 214 resembles that of England, 2. Companies Act 2002 originally companies ordinance. 3. The Bankruptcy Ordinance Cap 25 4. The Bills of Exchange Ordinance Cap 215 now act of 2002 5. The Cheques Act of 1969. 6. The Insurance Act, 1997 etc

Indian Acts are applied as per the judicature and application of laws act section 14 which says that the acts of the Governor-General of India in council set out in the third column second schedule hereto (and herein after referred to as Indian Acts) and such amendment of or substitution for the same as was in force on 1st December 1920 are, subjected to the exceptions described in the fourth column of the said schedule, hereby applied to Tanzania. Page 4

Most of the laws from India came to Tanganyika and then Tanzania through the Indian Acts (Application) Ordinance, Cap 2 of 1920 after the Tanganyika Order in Council. The following are examples of the adopted laws i. Indian Contract Act, 1872- it applied to Tanganyika before cap 2 came into existence and applied until its repeal in 1961 ii. The Law of Contract Ordinance, Cap 433 of 1961. iii. The Indian Limitation Act, 1908 came to be repealed by The law of Limitation Act, 1971 iv. The Indian Oaths Act, 1873 was dis-applied by The Oaths (Judicial Proceedings) and Statutory Declaration Act, 1966) v. The Indian Probate and Administration Act, 1881 which was repealed by The Probate and Administration of Estates Ordinance, 1961. vi. Indian code of Civil Procedure, 1908 which was replaced by The Civil Procedure Code, 1967 vii. Indian Companies Act, 1913 which applied to Tanganyika up to 1932 was repealed by the Companies Ordinance Cap 212 of 1932 (now companies Act, 2002) viii. Indian Succession Act, 1865. ix.

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PECULIARITY OF CODIFYING OF LARGE CHUNKS OF COMMON LAW

Most of the laws are foreign laws: as it has been shown above most laws that govern business issues in Tanzania were either codified by the colonial masters during their reign or imported by them form other countries including England or were maintained by our own government with little or insignificant change. Up to 2002 most of these laws bore the name of Ordinances proving that they were received from the British until when they changed into Acts, which does not defy their origin. I will mention some few examples of codifications COMPANY ACT Company contract: This law is explained by Tanzania Companies act in sec 38(a)(b) whereby A contract may be made (a) by a company, by writing under its common seal, or (b) on behalf of a company, by any person acting under its authority, express or implied, and any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company. While in common (British) Companies Act has been explained in sec 43(1)(a)(b) whereby it says:
(1) Under the law of England and Wales or Northern Ireland a contract

may be made (a) by a company, by writing under its common seal, or (b) on behalf of a company, by a person acting under its authority, express or implied.

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(2) Any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company. Minimum age for appointment as director In common (British) Companies Act has been explained in sec 194(1) to (7)(a)(b) whereby it says: (1) A person may not be appointed a director of a company unless he has attained the age of 16 years. (2) This does not affect the validity of an appointment that is not to take effect until the person appointed attains that age. (3) Where the office of director of a company is held by a corporation sole, or otherwise by virtue of another office, the appointment to that other office of a person who has not attained the age of 16 years is not effective also to make him a director of the company until he attains the age of 16 years. (4) An appointment made in contravention of this section is void. (5) Nothing in this section affects any liability of a person under any provision of the Companies Acts if he (a) purports to act as director, or (b) acts as a shadow director, although he could not, by virtue of this section, be validly appointed as a director. (6) This section has effect subject to section 158 (power to provide for exceptions from minimum age requirement).

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While in Tanzania Companies act in sec 157(1) to (6) where (I) Subject to the provisions of this section, no person shall be capable of being appointed a director of a company which is subject to this section if at the time of his appointment he had not attained the age of twentyone or he has attained the age of seventy. (2) Subject as above, a director of a company which is subject to this section shall vacate his office at the conclusion of the annual general meeting commencing next after he attains the age of seventy Provided that, acts done by a person as director shall be valid notwithstanding that it is afterwards discovered that his appointment had terminated by virtue of this subsection. (3) Where a person retires by virtue of subsection (2), no provision for the automatic reappointment of retiring directors in default of another appointment shall apply; and if at the meeting at which he retires the vacancy is not filled it may be filled as a casual vacancy. (4) Subsection (2) shall not apply to a director who is in office at the appointed day so as to terminate his then appointment before the conclusion of the third annual general meeting commencing after the appointed day, but shall apply so as to terminate it at the conclusion of that meeting if he has attained the age of seventy before the commencement of the meeting. (5) Nothing in the foregoing provisions of this section shall prevent the appointment of a director at any age above the age of eighteen, or require a director to retire at any time, if his appointment is or was made or approved by the company in general meeting, but special notice shall be required of any resolution appointing or approving the appointment of a director for it to have effect for the purposes of this subsection and the

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notice thereof given to the company and by the company to its members must state or must have stated the age of the person to whom it relates. (6) A person re-appointed director on retiring by virtue of subsection (2), or appointed in place of a director so retiring, shall be treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become director on the day on which the retiring director was last appointed before his retirement; but except as provided by this subsection, the retirement of a director out of turn by virtue of subsection (2) shall be disregarded in determining when any other directors are to retire. (7) In the case of a company first registered after the appointed day, this section shall have effect subject to the provisions of the company's articles; and in the case of a company first registered before the appointed day (a) this section shall have effect subject to any alterations of the company's articles made after the appointed day ; and (b) if at the appointed day the company's articles contained provision for retirement of directors under an age limit or for preventing or restricting appointments of directors over a given age this section shall not apply to directors to whom that provision applies. As per above examples we can see how Tanzania law has been codifying laws from Common Law INSURANCE LAW Despite the fact that there is insurance Act of 1996 and its predecessor the Insurance (vesting of interests and regulations) Act no. 4 of 1967 not everything is provided for in these two Acts thus leaving Insurance law to largely depend on common law.

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Extent of dependency on common law Since the insurance Act is more a regulatory1 piece than being substantive most of the substantive provisions are to be found at the common law and these are the most fundamental principles insurance builds on such as: (a) principles of indemnity, (b) insurable interest (c) subrogation and abandonment etc.

SHORTCOMINGS OF BUSINESS AND COMPANY LAW

E-Commerce Under E-commerce we now have the so called the distance selling contracts using distance communication through Internet. A distance selling contract is any contract concerning goods and services concluded between a supplier and a consumer under an organized distance sales or service provision scheme run by the supplier, who for the purposes of the contract, makes exclusive use of one or more means of distance communication up to the moment at which the contract is concluded. Some of the questions to be posed in this discussion are for instance when using Internet, when is communication deemed to be an offer and to bind the offeror? When is the acceptance is deemed to be effective? The problem which might be observed in online contracts how to determine the rule as regards to instantaneous communication which should apply or whether the postal rule is the more appropriate analogy (so that dispatch of the accepting email or response form is effective).

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Due to the nature of our laws and limited computer legal knowledge for our courts the courts could face a dilemma in answering the following legal issues. For instance: a) In Cyberspace contracts, where the contract is actually formed, how is it formed and in what ways can acceptance be communicated? b) Can a computer accept an offer and send a contract? If a person wishes to buy a book through for instance Amazon.Com and makes an offer online,, can the merchants Web server accept the offer and create the contract?. One can also imagine that where A sends an email to B, when is the contract really formed and who is bound by it, the sender or the receiver? Some scholars have argued that the moment the merchant sends back the e-mail to the buyer, the On the other hand the Computer might respond to the e-mail sent but suppose the other party server has a problem. How can the parties have knowledge as to whether their communication is effective? In this case the Court ruled that; since the computer only operates as programmed by the insurance company, it was bound by the contract formed. Based on these two precedents, like English courts our courts would also probably decide that a web server, as an agent of the online business, can make both offers and accept offers in order to create contracts. The proposed distance selling regulations will focus on protecting consumers who purchase goods and services over the Internet. Unlike Tanzania, English Law protects consumers in numerous ways by off-line laws which are applicable to the on-line world.

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The other problem to be observed in online business such as auction is when an offer is accepted and when revoked. Most of the Tanzania laws such as Contract Law and Sales of Goods 1979 provide that the sale by auction is complete on the fall of the auctioneers hummer. People dealing in online auctions contract might receive the wider protection of Consumer legislation as there is no auction home. It has been pointed out that in many on-line auctions there is a purported contract. On the other hand, airlines are now using Internet sales and e-tickets as a means of reducing distribution costs and serving money in terms of ticketing paperwork and staffing. The said travelling area needs to be regulated to protect the customers or consumers and other beneficiaries. These digitized services, digital information and cyberspace is also one of the area need to be covered by our laws. The other online aspects which need a review is advertisement, evidence and security. From the above argument one can observe that most of the Laws in Tanzania are based on off-line and do not accommodate online contracts. Furthermore the laws provide that the contract document must be signed handwritten, therefore there is no room for the supply of digitized products. The effect of this can be observed where the dispute arises between the parties dealing on online contract as to the performance then the court and lawyers might be in a hard position to determine which SW could apply. There is therefore need to reform our current commercial laws and introduce e-commerce rules so as to cope with the current world trends.

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Sale of goods acts The Laws related to the above subject matter protect consumers on offline laws only which hardly apply to the online business when it comes to the matter of distance contracts. The laws do not protect the consumers against any risks involved in distance selling and buying business because when these laws were passed the online or distance contracts were not in practice in Tanzania. In UK consumers can be protected against numerous risks in distance contracts by way of off-line laws which are equally applicable to the online law, The Sales of Goods Act, The Supply of Goods and Services Act and Consumer Protection Act 1987 offer a remedy to the defective products etc. It should be remembered that in ecommerce contract. The laws in Tanzania neither cover distance selling contracts nor recognize Cyber space or digital signatures. What the laws say is that, the contract must be in writing and duly signed or authenticated before a witness, With e-commerce this arrangement is no longer applicable hence affecting the former laws which have to face changes and reforms to accommodate e-commerce principles. There is a need for our country to introduce distance selling regulations. These laws will focus on protecting consumers who purchase goods and services over the Internet. Banks and Financial Institutions Banks are now using new technology through online service whereby people can open online Account Bank. The effects of e-commerce can also be observed in the laws related to the Banking or financial transactions. The new methods of payments for goods and services under Page 13 contracts e.g. distance contracts parties (supplier & consumer) do not come face to face prior to the conclusion of the

e-commerce which can be seen as a logical development of conventional cheques related to Bills of exchange can affect the Bills of Exchange Law. The combined definition of a bill of exchange and a Cheque has to be affected. All these elements are now contained in electronic analogy of the cheque through the use of sophisticated Cryptography and cyberspace allowing the creation of digital signatures. However to enable digital money to replace cheques in Tanzania, a new legislation has to be introduced. Moreover the new mode of electronic funds transfer (SWIFT) between financial institutions from one country to another can also affect the Commercial laws related to financial Institutions in Tanzania such as Banking and Financial Institution Act 1991 and Bank of Tanzania Act 1995. These laws have to be amended to accommodate the new electronic communication, services, payment and transfer of money. Furthermore the new e-commerce money transfer such as the use of VISA, Master Card, and Credit Cards which is now universally accepted as payment mechanism is becoming alternatives to conventional bank transfer apart from overtaking personal cheques hence affecting commercial laws. People can use online payment through internet using these cards. Different from use of a Cheque, the payment by EFTPOS is effected by the giving of instructions by the buyer to his or her bank to make the payment to the retailer.

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