Hospitality Law Notes

INTRODUCTION TO HOSPITALITY AND TOURISM LAW

Law affects every aspect of our lives, governing conduct from birth to death and even beyond. It is essential for individuals to understand their rights and obligations.

Law is a rule that actions conform or should conform to. In its strictest sense, it refers to rules of conduct imposed by a government on its members and enforced by courts.

Classification of Law
Public vs. Private Law

  • Public Law: Governs relations between citizens and the state, and between states (public international law). Includes criminal, constitutional, and administrative law.

  • Private Law: Governs relations among citizens. Includes law of property, persons, contract, and tort.

Criminal vs. Civil Law

  • Criminal Law: Defines acts prejudicial to society, leading to prosecution and punishment, usually stipulated in the penal code. Prosecution is conducted in the name of the state.

  • Civil Law: Regulates relations between private individuals, enforcing obligations or compensating injured parties. Proceedings are instituted by the wronged individual (plaintiff).

Substantive vs. Procedural Law

  • Substantive Law: Defines what is lawful and unlawful.

  • Procedural Law: Defines the steps or procedure to be followed in enforcing law in court, guiding the court on how to conduct civil and criminal cases.

Mercantile/Commercial Law

Branch of law concerning trade, industry, and commerce, including laws relating to:

  • Contracts

  • Sale of goods

  • Partnerships and companies

  • Negotiable instruments

  • Insurance

  • Insolvency

  • Carriage of goods

  • Arbitration

Sources of Law

The sources of Kenyan law are stated in the JUDICATURE ACT section three.

Section 3(1) specifies that the jurisdiction of courts shall be exercised in accordance with:

  • The Constitution: The supreme law of the land, outlining the composition and powers of state organs and their relationship with citizens. If any other law is inconsistent, the constitution prevails.

  • Written Laws (Statutes): Enacted by parliament, including direct (made by parliament) and indirect legislation (where parliament confers power on other bodies).

  • Common Law: Developed by English courts based on ancient customs, it is unwritten.

  • Doctrines of Equity: Developed in the Court of Chancery to supplement common law, addressing areas where common law provided no or inadequate remedy. Equity supersedes common law.

  • Statutes of General Application: Statutes applying to inhabitants of England generally.

Section 3(2) guides that courts shall be guided by African customary law in civil cases involving parties subject to it, as long as it is applicable, not repugnant to justice/morality, and consistent with written law.

Kenyan Court Structure

Courts are the focal point for dispute settlement, establishing facts, identifying legal rules, and formulating solutions. Decisions impact parties and set judicial precedents.

Superior Courts

  • Supreme Court: Exclusive original jurisdiction in presidential election disputes. Appellate jurisdiction over constitutional interpretation and matters of general public importance. Decisions are binding on all courts.

  • Court of Appeal: Jurisdiction to hear appeals from the High Court and any other court or tribunal.

  • High Court: Unlimited original jurisdiction in criminal and civil matters. Jurisdiction to determine fundamental right denials, hear appeals from tribunals, and interpret the constitution.

Subordinate Courts

  • Magistrate Courts

  • Kadhi’s Courts: Limited jurisdiction in matters of personal status, marriage, divorce, and inheritance for Muslims.

  • Court Martial: Convened by the Chief of General Staff to try offenses under the Armed Forces Act. Decisions are appealable to the High Court.

  • Tribunals: Special courts by statute for various disputes (e.g., rent tribunals), offering accessibility, lower costs, and specialized personnel.

Roles of Hospitality Manager

Hospitality and tourism managers must be multitalented, with expertise in food and beverage, marketing, accounting, rooms management, and specialized roles like employee counselor, interior designer, facility engineer, and computer systems analyst.

They manage raw materials, production, service, and sales, differing from manufacturing and retail counterparts. Direct guest contact is crucial..

Managers frequently make decisions impacting legal standing, with an estimated 60-70% involving legal dimensions, influencing the likelihood of litigation.

Decision Making by Courts

Courts are bound by two doctrines:

  • Stare Decisis: Like cases are decided alike; courts follow previous decisions.

  • Precedent: Decisions of superior courts bind lower courts in similar cases.

Settlement of Disputes

Disputes can be settled through litigation or arbitration. Arbitration is recommended before litigation due to court delays, costs, and potential inefficiencies.

Advantages of Arbitration:

  • Parties define issues, unlike court-determined cases.

  • All parties agree on dates, unlike magistrate-set dates.

  • Neutral arbitrator fosters trust and minimizes hostility.

  • Lower financial outlay compared to court costs.

  • Faster case handling than court proceedings.

  • Efficient documentation and retrieval of information.

  • Confidentiality, unlike public court cases.

  • Assessment of attempted negotiations before court assumption of failure.

Arbitration Techniques

  • Neutral Fact Finding: Third party helps find common ground and points of difference.

  • Conciliation: Intermediary helps parties communicate and discuss issues.

  • Mediation: Confidential negotiation with a neutral third party for a satisfactory settlement.

The Court Process

After failing to obtain settlement through arbitration, a party consults an advocate who:

  1. Determines the Appropriate Court: Based on jurisdiction.

  2. Starts a Pleading Process: Preparing a statement of claim for the court and defendant (plaint). Pleadings are written statements by plaintiffs and defendants of their respective claims and defenses.

    • Defendant can deny or confess. Defendant through advocate may negotiate towards arbitration. If negotiations successful, the court is informed and the case is dismissed. Otherwise, pleadings begin court process.

  3. Determining the Law: Advocate considers whether case favors client and whether legal rules are favorable. Presents oral submissions with authority (cases, statutes).

Ethics and the Law

Ethical conduct involves choosing the “right thing to do,” which may not always align with legal requirements. Ethical behavior can prevent legal issues.

Seven guidelines for evaluating a possible course of action:

  1. Is it legal?

  2. Does it hurt anyone?

  3. Is it fair?

  4. Am I being honest?

  5. Would I care if it happened to me?

  6. Would I publicize my action?

  7. What if everyone did it?

BUSINESS ASSOCIATIONS

Importance of Business Structure

Organizational structure (legal formation) and operating structure (relationship between owners and management) are crucial for business success.

Courts and government treat businesses differently based on organizational structure. It is important to select an organizational structure that favors both the business and its owner.

Common Hospitality and Tourism Organizational Structures

  • Sole Proprietorship: The most common and simple, with minimal formalities. Financed mainly through owner's savings and loans from friends/relatives.

  • Partnership: A relationship where persons carry on a business in common with a view of profits. Partners share finances and managerial resources with the aim of making a profit which they will share on an agreed ratio.

    • General Partnership: Similar to sole proprietorship but with two or more owners. Partners share responsibility and have unlimited liability (liable jointly and severally).

    • Limited Partnership (LP): Consists of limited partners (investors) and a general/managing partner. Liability is limited for limited partners not involved in managerial decisions.

  • Limited Liability Company (LLC): Members are protected from company’s debts unless they have personally guaranteed a loan for the business. Members can serve as company owners or managers while protecting their personal assets from liability.

Common Hospitality Operating Structures

  • Owner-Operator: Owners directly manage the business.

  • Franchise: Contract between franchisor and franchisee where the franchisee operates under the parent company's brand.

  • Management Contract: Owners hire a management company to operate the business.

The Agency Relationship

Relationship between businesses and their hired help usually takes one of three forms:

  • Master – servant: Also known as the employer-employee relationship, where “servant” is the employee controlled by the employer, who is usually responsible for their behaviors.

  • Agent – principal: An agent is empowered to act on behalf of the principal, with some degree of personal discretion and the principal is ordinarily responsible for the conduct and obligations undertaken by the agent. Agents have a fiduciary duty to act in the best interests of their principals. Fiduciary duties include Utmost care, Integrity, Honesty and duty of full disclosure, Loyalty, and Duty of good faith.

  • Independent contractor: The employer has very little control if any, over the conduct of the independent contractor; the independent contractor is usually not an agent; employer is not liable for the behavior of independent contractors.

Criteria for determining the relationship between a business entity and its employees, agents, and contractors include the degree of control, investment, permanency of work relationship, and integration of the worker’s services into the employer’s operation.

LAW OF CONTRACT

Valid contracts may be established either in writing or verbally. In most cases, written contracts are preferred over verbal contracts

Components of an Enforceable Contract

Elements of a contract include offer, acceptance, contractual capacity, intention to create a legal relationship, and consideration.

Offer

An offer is an indication of willingness to do or refrain from doing something that is capable of being converted by an acceptance into a binding contract. A person making an offer is known as the offeror, proposer or promisor and the person to whom it is made is called the offeree or promise.

Types of Offers

  • Counter Offer: Varies the terms of the original offer, acting as a rejection of the original.

  • Cross Offer: Simultaneous offers that are not mutual acceptances.

  • Conditional Offer: Subject to certain conditions.

Rules Regarding a Valid Offer

  • Specific or General: Specific offers made to definite persons, general offers to the public.

  • Knowledge of the Offer: Acceptance requires prior knowledge of the offer.

  • Certainty of Expression: Must not be ambiguous.

  • Express or Implied: Express offers use words; implied offers are inferred from conduct.

Termination of an Offer

An offer lapses or is terminated by:

  • Revocation: Offeror withdraws before acceptance, communicating it to the offeree.

  • Lapse of Time: Offer not accepted within a reasonable time.

  • Death: Offer terminates if death occurs before acceptance and is known to the offeree.

  • Failure of Condition: Offeree fails to fulfill a condition precedent to acceptance.

  • Counter Offer or Rejection: Rejection terminates offer.

  • Illegality of Subject Matter: Offer becomes illegal after it has been made and before it is accepted.

Acceptance

Acceptance is an assent to the terms of an offer. It must correspond with the terms of an offer and it is for this reason that a counter offer, cross offer or conditional assent is not acceptance. For the acceptance to be valid, it must accord exactly to the wording of the offer.

Rules of Acceptance

  • Given by the Person to Whom the Offer Is Made: You can't substitute someone else to fill the offer.

  • Absolute and Unqualified: Acceptance must correspond in every detail with the terms of the offer.

  • Express or Implied: It is expresses when it is communicated by words written or spoken by doing some required act. It is to be implied when it is gathered from surrounding circumstance or the conduct of parties.

  • Communicated to the Offeror: Acceptance is ineffective until communicated, but there some exceptions: if the offerer waves communication and under the