Business/commercial law essay question and answers

Simiyu Tito requested Wanyonyi Peter to lend him Shs. 5,000 (five thousand shillings) to be repaid within a month. Wanyonyi Peter enquired what Simiyu Tito needed the money for and Simiyu Tito replied that he needed Shs. 2,000 (two thousand shillings) to buy food for his children and Shs. 3,000 (three thousand shillings) to bribe someone who could fix for him a person who had been bothering him. Wanyonyi Peter lent Simiyu Tito the money. A month later, when Wanyonyi Peter asked Simiyu Tito for repayment of the Shs. 5,000 (five thousand shillings), Simiyu Tito refused to do so.

Explain the legal principles applicable in this case and advise Wanyonyi Peter. (8 marks)
ANSWER

• This problem is based on borrowing and illegality. The borrowing Simiyu Tito is on the face of it an ordinary contract between a lender and a borrower. However the contract is tainted with illegality in that part of the money borrowed is being used to promote corruption as well as facilitate the commission of a crime since Wanyonyi Peter is aware of the illegality the borrowing is unenforceable. This is because illegality renders a contract unenforceable and the operative principle in such a case is that gains and losses remain where they have fallen. Though part of the loan was used for a lawful purpose the entire contract is tainted with illegality.

• My advise to Wanyonyi Peter is that he cannot recover the amount borrowed from Simiyu Tito as he has no enforceable rights.



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