Hospitality and Tourism Law (BTH 4104) – Comprehensive Bullet-Point Notes

Course Administration

Code & Name: BTH 4104 – Hospitality & Tourism Law
Programme: BSc. Tourism & Hospitality Management
Facilitator: Dr Elizabeth Mokeira – Advocate, High Court of Kenya (specializing in legal aspects relevant to hospitality and tourism sectors, with practical experience in the Kenyan legal system).
Core Documents & Contacts - Email: emokeira@strathmore.edu
- Office: Law School, STMB – Ground Floor (available for student consultations during designated hours).
Rules of Learning - Class attendance & participation (a register is strictly maintained to track engagement and fulfill course requirements, emphasizing active learning).
- E-learning credentials: PZR@2024! (essential for accessing course materials, forums, and submitting assignments on the Learning Management System - LMS).
- Consultation hours: Posted on LMS (students are encouraged to utilize these hours for academic support and clarification).
- Assessments: CAT 1 (29 May 2024 @ 2 : 30 pm, Phase 1, no make-up will be offered for this continuous assessment test, so attendance is crucial); Final exam in July (comprising Q1 which is compulsory, and students must answer any 2 questions from Q2-Q5, requiring comprehensive knowledge of the course content).

Overall Syllabus

Introduction to Law & Ethics: Covers fundamental concepts of law, its various definitions, functions, and its relationship with business and ethical considerations prevalent in the tourism and hospitality industry.
The Enterprise (business-forms): Explores different legal structures for businesses, including sole proprietorships, partnerships, and companies, highlighting their legal implications and suitability for various ventures.
Contracts: Focuses on the formation, elements, terms, validity, discharge, and remedies related to legally binding agreements, which are central to all business transactions in hospitality.
Torts: Examines civil wrongs that cause harm or injury, such as defamation, trespass, and negligence, with an emphasis on liabilities and defenses pertinent to the industry.
Employment Law: Addresses the legal framework governing employer-employee relationships, including contracts, rights, obligations, termination, and health and safety regulations.
Property Law: Deals with rights and interests in land and chattels, covering leases, mortgages, and specific issues like guest property liability in hotels.
Insurance: Discusses the principles and common policies of insurance as a risk management tool, crucial for mitigating financial losses in tourism and hospitality operations.
Intellectual Property Rights: Covers patents, trademarks, industrial designs, and trade secrets, emphasizing their protection and importance in commercial branding and innovation.
(Ongoing) Revision & Legal Reasoning (IRAC): Provides a continuous review of topics and trains students in the IRAC method (Issue, Rule, Application, Conclusion) for effective legal problem-solving in examinations and professional practice.

1. Introduction to Law, Business & Ethics

1.1 Meaning/Nature of Law

Law is a complex concept with no single universal definition, making its study a cornerstone of Jurisprudence (Lat. jurisprudentia), which is the theory or philosophy of law.
A practical working description often used: “A body of rules, principles or regulations, recognised & enforced by a controlling authority to govern behaviour within a community.” This highlights law's regulative and authoritative nature, aimed at maintaining order.
Schools of Thought (different perspectives on the nature and origin of law):
- Natural Law: Proposes that a higher, universal moral law exists, inherent in human nature and discovered by reason, dictating what is just. Laws made by humans must conform to this higher law to be valid.
- Positivism: Argues that law is a system of rules created by a sovereign authority (e.g., government) and is valid simply because it is enacted, regardless of its moral content. Focuses on 'what the law is' rather than 'what it ought to be'.
- Legal Realism: Emphasizes the role of judges and judicial discretion in shaping the law, viewing law not just as written rules but as the actual practices and decisions of legal institutions, particularly courts.
- Historical School: Believes that law is a product of the historical development and cultural traditions of a society, evolving from the customs and beliefs of its people.
- Sociological School: Views law primarily as a social phenomenon, a tool for social engineering and change, focusing on the actual effects of laws on society rather than just their formal validity.
- Marxist School: Interprets law as a tool used by the ruling class to maintain power and suppress the proletariat, reflecting capitalist economic interests.
- Feminist School: Critiques law from a feminist perspective, arguing that legal systems often reflect patriarchal biases and perpetuate gender inequality, seeking to reform laws to achieve gender justice.

1.2 Functions of Law

Social control: It sets standards of behavior, provides mechanisms to enforce these standards, and maintains order by defining and punishing deviant acts.
Dispute resolution: Provides formal institutions (courts) and processes (litigation, arbitration) to resolve conflicts peacefully and justly between individuals, groups, or the state.
Social change: Can be a catalyst for societal transformation by enacting new policies, protecting rights, or addressing emerging social problems (e.g., environmental laws, civil rights acts).
Facilitate private choices: Enables individuals and entities to make their own arrangements and pursue their interests, for example, by providing the framework for contracts, wills, and property ownership.
Promote rights & freedoms: Defines and safeguards fundamental human rights and civil liberties, ensuring protection against arbitrary state action and promoting equality and justice.

1.3 Why Tourism/Hospitality Students Study Law

Decision-making in business: Legal knowledge is crucial for making informed operational and strategic decisions, ensuring compliance and mitigating risks.
Employment & HR: Understanding labor laws, contracts, workplace safety, and discrimination policies is vital for managing staff and maintaining a fair work environment.
Crime prevention: Awareness of criminal law helps businesses implement security measures, protect guests and assets, and manage incidents of theft, fraud, or assault.
Environmental regulation: Adherence to environmental laws (e.g., waste management, conservation) is increasingly important for sustainable tourism and avoiding penalties.
Contracts & torts (guest injury, negligence): Hospitality businesses constantly enter into contracts (with guests, suppliers, employees) and face potential tort liabilities due to guest injuries, food poisoning, or negligence, requiring strong legal awareness.
Internet & property matters: Dealing with online bookings, data privacy (e.g., GDPR, local data protection acts), intellectual property, and real estate transactions necessitates legal expertise in a digital age.
Consumer protection: Understanding consumer rights and obligations ensures fair dealings with guests, building trust and reputation.
Licensing and regulation: Compliance with specific industry licenses, permits, and regulatory bodies (e.g., tourism authorities, health departments) is mandatory for operation.

1.4 Law & Morality

Law: Consists of rules that are externally enforceable by state institutions (e.g., courts, police); obedience is compelled by sanctions.
Morality: Relates to societal standards of right and wrong, dictated by individual conscience-binding principles, values, or religious beliefs; generally non-enforceable by courts as a direct legal obligation.
Key Distinctions:
- Universality: Laws aim for universal application within their jurisdiction; morality can vary significantly between individuals or groups.
- Source of authority: Law derives authority from legitimate legislative or judicial processes; morality from tradition, religion, conscience, or philosophical reasoning.
- Enforceability: Law uses coercive power (fines, imprisonment); morality relies on social disapproval, guilt, or spiritual consequences.
- Domain of study: Law is studied under jurisprudence (the philosophy of law); morality is the domain of ethics (the study of moral principles).
- Overlap: While distinct, there is significant overlap. Many laws are based on moral principles (e.g., laws against murder). However, not all moral wrongs are illegal (e.g., lying to a friend), and not all legal acts are considered moral (e.g., certain tax loopholes).

1.5 Ethics

Derived from the Greek word ethos, meaning 'character' or 'custom'. Ethics is a branch of philosophy that examines moral principles, values, and duties, guiding what is considered right or wrong conduct.
Business ethics: A specialized field focusing on moral and ethical problems that arise in a business environment. It involves balancing profit-maximisation (a primary goal of business) with stakeholder interests (considering the impact on employees, customers, suppliers, community, environment, and shareholders).
Cardinal values (fundamental principles guiding ethical conduct):
- Transparency: Openness and clear communication in all dealings, ensuring information is readily available and understandable.
- Accountability: Taking responsibility for one's actions, decisions, and their consequences.
- Responsibility: Fulfilling duties and obligations, especially regarding societal and environmental impact.
- Honesty: Truthfulness and sincerity in all interactions, avoiding deception or misrepresentation.
- Dignity: Treating all individuals with respect and valuing their inherent worth.
- Fairness: Impartial and just treatment, free from bias or favoritism.
- Respect: Showing consideration and esteem for others, including their rights, beliefs, and differing viewpoints.

2. Classification of Law

Written vs Unwritten:
- Written Law (codified): Refers to laws that are formally enacted by a legislative body and recorded in statutes, constitutions, or regulations (e.g., Acts of Parliament, subsidiary legislation). It provides certainty and accessibility.
- Unwritten Law (customary/common law): Refers to laws that are not formally enacted but derive from judicial precedents (judge-made law, also called common law), long-standing customs, or general principles, forming over time through practice and judicial interpretation.
Municipal $ext{(National)}$ vs International:
- Municipal Law: The domestic law of a state, governing activities within its borders and its relationship with its own citizens (e.g., Kenyan laws).
- International Law: Governs the relationships and conduct between states, and, in some cases, international organizations and individuals (e.g., treaties, international customs, principles of international human rights law).
Public vs Private:
- Public Law: Governs the relationship between the state and its citizens, dealing with matters where the state has a direct interest. This includes constitutional law, administrative law, and criminal law.
- Private Law: Governs the relationships between individuals or private entities, dealing with matters of private rights and obligations. This includes contract law, tort law, family law, property law, and commercial law.
Substantive vs Procedural:
- Substantive Law: Defines rights, duties, and obligations, and prohibits certain acts (e.g., the content of a criminal offence like murder, or the provisions of a contract). It addresses 'what the law is'.
- Procedural Law: Lays down the rules for enforcing substantive law; it prescribes the methods, steps, and procedures for legal proceedings (e.g., Criminal Procedure Code outlines how criminal cases are investigated, prosecuted, and tried). It addresses 'how the law is enforced'.
Criminal vs Civil:
- Criminal Law: Deals with acts that are considered offenses against the state or society as a whole, aiming to punish offenders and deter future crimes. Cases are initiated by the state/prosecution.
- Civil Law: Deals with disputes between individuals or organizations, aiming to resolve grievances, typically through monetary compensation (damages) or equitable remedies, to restore the injured party to their original position.

2.1 Criminal Process

Investigations (gathering evidence by police) → Arrest (detention of suspect) → Charge (formal accusation of a crime) → Plea (accused responds to charge: guilty or not guilty) → (If not guilty) Trial (presentation of evidence and arguments by prosecution and defense) → Verdict (decision by court/jury on guilt or innocence) → Sentencing or Acquittal (imposition of punishment if guilty, or release if innocent) → Appeal (request to a higher court to review the lower court's decision).

2.2 Civil Process

Pleadings (formal written statements by parties: Plaint by plaintiff, Defence by defendant, Reply by plaintiff) → Discovery (exchange of information and evidence between parties before trial, e.g., interrogatories, document production) → Motions (formal requests to the court for a specific ruling, e.g., summary judgment motion) → Pre-trial conference (meeting between parties and judge to narrow issues, consider settlement) → Trial (presentation of evidence and arguments) → Judgment (court's decision, which may include damages (monetary compensation), injunction (court order to do or stop an action), S.P. (specific performance - order to fulfill a contractual obligation)) → Appeal (request to a higher court for review) → Enforcement (steps taken to ensure compliance with the judgment, if necessary).

2.3 Distinction Table (Key Points)

Party names: In criminal cases, it’s the Republic (or State/Crown) vs Accused (or Defendant); in civil cases, it's the Plaintiff (the party initiating the lawsuit) vs Defendant (the party being sued).
Standard of proof: In criminal cases, conviction requires proof Beyond reasonable doubt (the highest standard, meaning almost certain); in civil cases, it requires proof on the Balance of probabilities (more likely than not, typically >50% chance).
Aim: The primary aim of criminal law is to Punish offender (e.g., imprisonment, fines) and deter crime; the primary aim of civil law is to Compensate plaintiff for losses or injury, or to enforce rights.
Burden lies on: The Prosecution (state) bears the burden of proving guilt in criminal cases; the Plaintiff (aggrieved party) bears the burden of proving their case in civil matters.

3. Sources of Kenyan Law

Constitution (supreme – Article 2 supremacy clauses): The Constitution of Kenya 2010 is the supreme law, meaning all other laws and acts must conform to it (Article 2(1)). Any law inconsistent with the Constitution is void to the extent of the inconsistency (Article 2(4)). It provides the foundational legal framework, outlines fundamental rights and freedoms, and establishes the structure of government. It also incorporates ratified treaties as part of Kenyan law (Article 2(5) and (6)).
Legislation (Acts of Parliament e.g. Tourism Act 2011; delegated legislation – Tourism Regulatory Authority Regulations 2014, Tourist Vehicle Regs 2015).
- Acts of Parliament: Laws enacted by the Parliament of Kenya, which is the primary legislative body (e.g., the Tourism Act 2011 which regulates the tourism sector).
- Delegated Legislation (or Subsidiary/Subordinate Legislation): Laws made by bodies other than Parliament, under powers granted by an Act of Parliament. These include regulations, rules, bylaws, and orders (e.g., the Tourism Regulatory Authority Regulations 2014 which set specific standards for tourism operators, or the Tourist Vehicle Regulations 2015 governing transport in tourism). This allows for detailed rules to be made without overburdening Parliament, but must be consistent with the parent Act.
Ratified treaties & general international law – Article 2(5), (6) (e.g. UNWTO Global Code of Ethics).
- Article 2(5) states that the general rules of international law form part of the law of Kenya.
- Article 2(6) provides that any treaty or convention ratified by Kenya shall form part of the law of Kenya under the Constitution. This means international agreements, once ratified, have direct legal effect domestically, influencing various sectors, including tourism (e.g., the principles of the UNWTO Global Code of Ethics for Tourism, which aims to promote responsible and sustainable tourism practices worldwide).
Statutes of General Application (England, pre-12 Aug 1897): These are specific English statutes that were in force in England on August 12, 1897, and were received into Kenyan law (then British East Africa) by virtue of the Judicature Act. They apply only where no specific Kenyan legislation covers the matter and where they are suitable to the local circumstances (e.g., the Factors Act, dealing with agents, or the Infants Relief Act, pertaining to contracts with minors).
Common Law & Equity:
- Common Law: Developed from decisions of English courts, it is judge-made law evolved through precedents. It focuses on consistent application of rules based on previous similar cases.
- Equity: A system of law developed in England to mitigate the harshness and rigidity of common law. Historically, common law was criticised for its strict adherence to procedure, delays, and often only offering monetary-only remedies (damages). Equity provided more flexible and just remedies when common law remedies were inadequate.
- Equitable cures: These remedies address situations where monetary compensation is insufficient or inappropriate. Examples include:
  - Injunction: A court order compelling a party to do or refrain from doing a specific act.
  - Specific Performance (S.P.): An order compelling a party to fulfill their contractual obligations, especially when the subject matter is unique (e.g., land).
  - Rescission: Setting aside a contract and restoring parties to their pre-contractual position, typically due to misrepresentation or mistake.
  - Rectification: Amending a written contract to reflect the true intentions of the parties when there is a mutual mistake in recording their agreement.
Judicial Precedent (Doctrine of stare decisis): Also known as case law, this source involves courts following decisions of higher or equally-ranked courts in previous similar cases. It ensures consistency, predictability, and fairness in the application of law.
- Ratio decidendi: The reason for the decision; it is the legal principle or rule upon which a court's decision is based and is binding on lower courts in subsequent similar cases.
- Obiter dictum: “Says by the way”; a statement made by a judge that is not essential to the decision but may provide guidance or illustrate a point. It is persuasive but not binding.
- Conditions for precedent to be binding:
  - The facts of the current case must be sufficiently similar to the precedent case.
  - The precedent must come from a superior court in the same judicial hierarchy.
  - The previous decision must have established a point of law directly relevant to the current case.
African Customary Law: Refers to the traditional laws and customs of various ethnic communities in Kenya. It is recognized as a source of law primarily for civil matters, particularly those relating to personal status, marriage, divorce, and inheritance, provided the parties are bound by it and it is not repugnant to justice or morality, or inconsistent with any written law. Its application is subject to constitutional limitations.
Islamic Law (Sharia Law): Administered by Kadhi’s Courts in Kenya, established under the Constitution. Its jurisdiction is specifically limited to matters of marriage, divorce, and personal status, and succession (inheritance) where all parties involved are Muslims voluntarily submitting to the court's jurisdiction. It is strictly applied based on Islamic religious principles.

4. The Enterprise

4.1 Legal Persons

Natural Persons: Refers to human beings recognized by law as having rights and obligations. They acquire legal personality at birth (or sometimes upon conception for certain rights) and lose it upon death. They can enter contracts, own property, sue, and be sued.
Artificial Persons (Corporations): Entities created by law that are distinct from their human owners or members. These include companies, statutory corporations, and cooperatives. They have legal rights and duties, can own assets, incur debts, sue, and be sued in their own name, independent of their members.

4.2 Sole Proprietorship

The simplest form of business ownership, where an individual owns and runs the business. There is no legal distinction between the owner and the business.
Advantages:
- No formalities/easy to start: Minimal legal requirements or registration processes, making it quick and inexpensive to establish.
- Full control: The owner has complete autonomy over all business decisions.
- Tax once: Profits are taxed only as part of the owner's personal income, avoiding corporate tax.
- All profits: The owner retains 100% of the profits generated by the business.
Disadvantages:
- Unlimited liability: The owner's personal assets (e.g., house, car) are not separate from the business and can be used to settle business debts, posing a significant risk.
- Limited capital/skill: Funding is often limited to the owner's personal resources or simple loans, and the business relies solely on the owner's skills and expertise.
- Continuity issues: The business's existence is tied to the owner; it may cease to exist upon the owner's death, severe illness, or retirement.
- Difficulty raising finance: Banks and investors may be reluctant to lend large sums given the unlimited liability and single-person dependency.

4.3 Partnership (Partnerships Act 2012)

Definition: “relation subsisting between persons carrying on business in common with a view of profit.” This implies a mutual agreement and shared objective to generate income.
Typically consists of 2–20 partners for a general partnership (though certain professions like lawyers or accountants may have exceptions). If more than 20, it should generally be registered as a company.
Unlimited liability for general partners (each partner is personally liable for all partnership debts). However, Limited Liability Partnerships (LLP) exist in some jurisdictions, offering limited liability to all partners, similar to a company, while retaining partnership characteristics.
Deed contents (a formal partnership agreement, though not mandatory, is highly recommended to prevent disputes):
- Name of the firm (partnership): The official trading name.
- Capital contribution: How much money or assets each partner contributes to the business.
- Profit-sharing ratio: The agreed proportions in which profits and losses will be divided among partners.
- Duties & responsibilities: Specific roles, tasks, and obligations assigned to each partner.
- Admission/retirement rules: Procedures for bringing in new partners or for existing partners leaving the firm.
- Dispute arbitration: Mechanisms for resolving disagreements between partners without resorting to litigation.
- Drawings, salaries, duration, dissolution conditions, etc.
Default rules (apply if there is no written partnership agreement):
- Partners share profits and losses equally, regardless of capital contribution.
- No partner is entitled to remuneration (salary) for active involvement in the business.
- Every partner has the right to take part in the management of the business.
- Unanimous consent (agreement of all existing partners) is required for the admission of new partners.
- No partner can expel another partner.
- Loans by partners to the firm beyond their agreed capital accrue interest at a fixed rate (e.g., S. 27(3) of English Partnership Act 1890, often mirrored in modern acts).

4.4 Company (Companies Act 2015)

A legal entity distinct from its owners (shareholders) and managers. Governed by the Companies Act 2015 in Kenya.
Separate personality: The seminal case of Salomon v Salomon & Co Ltd (1897) established the principle that a company is a separate legal entity from its members. This means members are not liable beyond the amount unpaid on their shares or the amount of their guarantee.
Key Attributes of a company:
- Limited liability: Shareholders' liability is restricted to their investment (shares) or guarantee, protecting their personal assets.
- Perpetual succession: The company's existence is not affected by the death, insolvency, or transfer of shares by its members, unlike a sole proprietorship or general partnership. It continues indefinitely.
- Own property: The company can own assets (land, buildings, equipment) in its own name, distinct from the assets of its shareholders.
- Sue/be sued: The company can initiate legal action or be sued in its own corporate name.
- Common seal (though its use has become less mandatory with modern electronic signatures, it historically served as the official signature of the company).
Types of Companies (based on liability and transferability of shares):
- Company Limited by Shares: Most common type, where members' liability is limited to the amount unpaid on their shares.
- Company Limited by Guarantee: Members' liability is limited to the amount they agree to contribute to the company's assets in the event of winding up. Often used by non-profit organizations.
- Unlimited Company: Members have no limit to their liability, similar to a partnership, but the company still has separate legal personality.
- Private Company: (e.g., Ltd.)
  - Restricts the right to transfer its shares.
  - Prohibits any invitation to the public to subscribe for its shares or debentures.
  - Limits the number of members to a maximum of 50 (excluding employees).
  - Typically starts with