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MRL2601 Assignment 2 Memo 2024
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MRL2601 Assignment 2 Memo 2024
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lOMoAR cPSD| 22631064MRL2601
ASSIGNMENT 2 2024
DUE: 15 APRIL 24
This is an ordinary written or typed assignment. Do not use a mark-reading card.
Answering this question gives you practice in answering the type of problem- or
discuss-type questions that you may expect in the examination. Your answer per
question should not exceed one page. You may reference your sources as you wish, i.e.
in-text, or in footnotes. A bibliography is not needed but remember to include your
Honesty Declaration Form.
QUESTION 1
1.1 Lesedi and Simphiwe registered Furnmax (Pty) Ltd, a company that sells office
equipment. The Memorandum of Incorporation of Furnmax (Pty) Ltd indicates that the
board of directors, consisting of Lesedi, Simphiwe, Carol and Precious, can appoint a
managing director who would be authorised to contract on the company’s behalf. However,
the board has never formally appointed a managing director. Nevertheless, Lesedi, with the
full knowledge of the other directors, has contracted with Office Supplies Ltd for the
supply of office equipment to Furnmax (Pty) Ltd on two occasions. On the third occasion
that Lesedi contracted with Office Supplies Ltd, Furnmax (Pty) Ltd denied liability for the
payment for the equipment based on the fact that Lesedi was never appointed as the
managing director. Upon being sued by Office Supplies Ltd, Furnmax (Pty) Ltd opposed the
claim for payment in terms of the agreement based on the fact that Lesedi was not authorised
to contract on the company’s behalf.
Explain with reference to relevant case law what Office Supplies Ltd would have to
prove in order to rely upon the doctrine of estoppel.
For Office Supplies Ltd to use the estoppel rule, they have to show some things based on
past court cases. Estoppel stops someone from saying something different than what they
said before, especially if their earlier actions made someone else believe it was true and act
on it to their disadvantage.
Representation
Office Supplies Ltd must prove that Furnmax (Pty) Ltd made a representation, either through
words, conduct, or silence, that Lesedi had the authority to contract on behalf of the
company. This representation could be implied from the actions or words of Furnmax (Pty)
Ltd.
Reliance
Office Supplies Ltd must show that they reasonably relied on the representation made by
Furnmax (Pty) Ltd. They need to demonstrate that they entered into the contract with Lesedi
based on the belief that Lesedi had the authority to act on behalf of the company.
Change of Position
, lOMoAR cPSD| 22631064
Office Supplies Ltd must establish that they changed their position or suffered some form of
detriment as a result of their reliance on Furnmax (Pty) Ltd's representation. This could
include delivering goods or providing services based on the belief that the contract was valid.
Knowledge: Office Supplies Ltd would also need to show that Furnmax (Pty) Ltd had
knowledge of the representation being made and the subsequent reliance by Office Supplies
Ltd.
Unconscionability: Finally, Office Supplies Ltd must demonstrate that it would be
unconscionable or unjust for Furnmax (Pty) Ltd to deny the validity of the contract now, after
Office Supplies Ltd has relied on Furnmax (Pty) Ltd's representation to their detriment.
To support their case, Office Supplies Ltd may refer to relevant case law that demonstrates
how these elements have been interpreted and applied in similar situations. They would
need to show that the circumstances of their case meet all the necessary criteria for the
application of estoppel.
1.2 Green Developments (Pty) Ltd (‘the company’) was incorporated and registered
on 2January 2024. According to its Memorandum of Incorporation the main
purpose of the company is property development. The company’s board consists of
five directors namely, Tanya, Johan, Moses, Samson and James.
Prior to the incorporation of the company, Tanya concluded a written contract with
Joe Foster in the name of the then to be incorporated company for the purchase of a
fixed property in Midrand (‘the Midrand property’) at a price of R1 million.
Since the company’s incorporation and registration, the company did not take any
action in relation to the contract concluded by Tanya for the Midrand property.
With reference to the Companies Act 71 of 2008 advise on the statutory requirements
that must be met for the contract concluded by Tanya and Joe Foster to be binding on
the company.
To see if the deal Tanya made with Joe Foster is legally binding for Green Developments
(Pty) Ltd under the Companies Act 71 of 2008, we need to check if certain rules are
followed:
Authority of Tanya
Tanya must have had the authority to act on behalf of the company before its incorporation.
If she did not have such authority, the contract may not be binding on the company.
Ratification
The Company, after its incorporation, must have ratified the contract entered into by Tanya.
Ratification means that the company, through its board or other authorized means, explicitly
accepts and adopts the contract as its own.
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