, QUESTION 1 Johannes, Phineas and Beauty are Mnandi CC’s
members. Beauty has discovered that Phineas concluded a
contract on behalf of Mnandi CC for the purchase of a yacht
without consent of any of the other members. She is of the opinion
that Mnandi CC should not be bound to the contract because the
corporation’s main business is catering. In addition, she shows
you the association agreement which stipulates that only Johannes
is authorised to conclude contracts on behalf of Mnandi CC.
Advise Beauty whether or not Mnandi CC is bound to the contract
concluded by Phineas. Refer to relevant case law in your answer.
(5) 5
To determine whether Mnandi CC is bound to the contract
concluded by Phineas on behalf of the corporation, you need to
consider several aspects of agency law, the authority of members
in a close corporation, and the specifics of the association
agreement.
Analysis
1. Authority of Phineas:
o Actual Authority: Phineas lacked actual authority as
per the association agreement, which designates
Johannes as the only member authorized to conclude
contracts on behalf of Mnandi CC.
o Apparent Authority: If Phineas acted with apparent
authority, Mnandi CC could be bound to the contract
even if Phineas did not have actual authority. Apparent
authority arises when an agent acts in a manner that
reasonably leads third parties to believe they have
authority.
2. Scope of the Contract:
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