A +
QUESTION
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.
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ASSIGNMENT 01
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 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 how Cycle for Life (Pty) Ltd can prevent Touring Africa by Bicycle
(Pty) Ltd from arguing that it is not bound by the contract, we need to consider the
principles of authority in company law, particularly focusing on actual
authority and apparent authority.
Actual Authority
