Exam (elaborations)
LML4806 Assignment 1 Semester 2 2024 (Detailed solution)
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LML4806Assignment 1
Semester 2 2024
, Question 1
Advice to Cycle for Life (Pty) Ltd
Issue: Whether Touring Africa by Bicycle (Pty) Ltd is bound to the contract entered
into by James and Nancy despite the memorandum of incorporation that only the
board of directors has the authority to enter into contracts.
Legal Principle: Apparent authority or ostensible authority. It is the principle in the
law of agency that enables a company to be bound by the actions of one who has no
actual authority to act on its behalf, but whom the company has represented or held
out as having the authority.
Advice
Cycle for Life (Pty) Ltd should allege and prove the following:
Representation: Touring Africa by Bicycle represented to Cycle for Life that James
was mandated to enter into contracts for the sale of electric bicycles. It can be
inferred that this representation is implicit since James was a branch manager, and
in the past, he had entered into agreements with Cycle for Life without a hitch.
Reasonable reliance: It was reasonable on the part of Cycle for Life (Pty) Ltd to rely
on the representation of the company, believing James had the authority to contract
on its behalf. Detriment: There was detriment in that there was such reliance on the
part of Cycle for Life (Pty) Ltd by delivering electric bicycles to the Durban office of
the company.
If Cycle for Life (Pty) Ltd can successfully prove these elements, the company may
be estopped from denying James' authority and will thus be bound by the contract.
Relevant authority: International Shipping Co v Garlick & Co Ltd 1970 (3) SA 445 (A)
Question 2
Question 2.1
Issues—Whether the directors of Jenkins Investments Ltd have breached the duty of
care, skill and diligence and whether they may be held liable for losses suffered by
the company.
Section 76 of the Companies Act 71 of 2008 enjoins on directors the duty of care,
skill, and diligence. A director must, in carrying out his or her functions, act in the
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