Company Law LML4806 Semester 2 Assignment 1 - 2024 Mercantile Law Department
Question: 1
Jane, John and Jabulani are the directors of Touring Africa by Bicycle (Pty) Ltd (“the company”), a company that is based in Johannesburg. The memorandum of incorporation of the company provides that only...
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, Company Law LML4806 Semester 2 Assignment 1 - 2024 Mercantile Law Department
Question: 1
Jane, John and Jabulani are the directors of Touring Africa by Bicycle (Pty) Ltd (“the company”),
a company that is based in Johannesburg. The memorandum of incorporation of the company
provides that only the board of directors have the authority to enter into contracts on behalf of
the company. James, the branch manager of the company in Durban, attends an outdoor show
in Durban to scout for useful new products for the company’s cycling excursions. At the outdoor
show one of the exhibitors, Cycle for Life (Pty) Ltd, has a limited special offer on electric
bicycles for the amount of R120 000.00 per bicycle. James contacts the directors of the
company by way of a Zoom call, and while speaking to the directors of the company on the
Zoom call, James keeps his mobile phone on speakerphone. The directors instruct James to
purchase six of the electric bicycles on behalf of the company. Nancy, the representative of
Cycle for Life (Pty) Ltd, hears the instruction, and because James has previously entered into
agreements with Cycle for Life (Pty) Ltd without any problems, she enters into an agreement
with James for the sale of six electricbicycles to Touring Africa by Bicycle (Pty) Ltd. The electric
bicycles are delivered to the company’s Durban office. When Cycle for Life (Pty) Ltd sends an
invoice for payment of the total amount of R720 000.00 for the six electric bicycles, Touring
Africa by Bicycle (Pty) Ltd refuses to pay, arguing that it is not bound by the contract as James
did not have the authority to act on its behalf. Nancy approaches you for legal advice.
With reference to the relevant authority/principle and the facts, advise Nancy on what Cycle for
Life (Pty) Ltd must allege and prove in order to prevent Touring Africa by Bicycle (Pty) Ltd from
arguing that it is not bound by the contract concluded by Nancy and James
Answers
In the scenario presented, the key issue revolves around the authority of James, as the branch
manager, to enter into a contract on behalf of Touring Africa by Bicycle (Pty) Ltd. The
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