Exam (elaborations)
LML4806 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024 (818236) - DUE 25 August 2024
- Course
- LML4806
- Institution
- University Of South Africa
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LML4806 Assignment 1(COMPLETE ANSWERS)
Semester 2 2024 (818236) - DUE
25 August 2024
CONTACT: biwottcornelius@gmail.com
, LML4806 Assignment 1 (COMPLETE ANSWERS)
Semester 2 2024 (818236) - DUE 25 August 2024
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 electric 4 bicycles 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. (5)
To advise Nancy on what Cycle for Life (Pty) Ltd must allege and prove to prevent Touring
Africa by Bicycle (Pty) Ltd from claiming that it is not bound by the contract, we need to
consider the following legal principles regarding authority in agency and corporate governance.
Relevant Authority/Principle
1. Actual Authority: James, as the branch manager, may have had actual authority to enter
into contracts on behalf of the company. However, the memorandum of incorporation
specifies that only the board of directors has the authority to enter contracts. Therefore,
James's authority is limited unless it can be proven otherwise.
2. Apparent Authority: This principle holds that if a third party (Cycle for Life) has reason
to believe that an agent (James) has authority to act on behalf of the company, the
company may be bound by the agent's actions even if the agent lacked actual authority.
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