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LML4806 ASS 1 20024 S2QUESTION 1
Legal Advice to Nancy Regarding the Enforceability of the Contract
Nancy from Cycle for Life (Pty) Ltd entered into a contract with James, the branch manager of
Touring Africa by Bicycle (Pty) Ltd, for the sale of six electric bicycles. Touring Africa by
Bicycle (Pty) Ltd now refuses to pay, arguing that James lacked the authority to bind the
company. Nancy needs to ensure the contract is enforced despite this challenge.
1. Authority of the Representative
Understanding Authority
Types of Authority
Actual Authority- This is the authority explicitly granted by a company’s governing
body, such as its board of directors. In this case, the board authorized James to make the
purchase via a Zoom call.
Apparent Authority- This arises when a representative appears to have the authority to act
on behalf of the company, even if they do not have actual authority. Apparent authority is
based on the representative’s role and previous interactions with third parties.
Legal Framework
Companies Act 71 of 2008-Section 20(7) provides that a company is bound by the
actions of its representatives if such actions are within the scope of their actual or
apparent authority.
2. What Nancy Must Prove
Proving Actual Authority
, Direct Authorization- Nancy should demonstrate that the directors of Touring Africa by
Bicycle (Pty) Ltd provided explicit instructions to James during the Zoom call to
purchase the bicycles. Relevant evidence might include
Transcript or Recording- A transcript or recording of the Zoom call confirming
the directors’ instructions.
Confirmation in Writing-Any follow-up correspondence or notes from the
directors that confirm their authorization of the purchase.
Establishing Apparent Authority
Previous Transactions
Nancy should show that James had previously conducted transactions with Cycle for
Life (Pty) Ltd without any issues, suggesting that James had the authority to make the
purchase. This can be evidenced by
Historical Business Dealings-Documentation of previous contracts and
interactions between James and Cycle for Life (Pty) Ltd that demonstrate James’s
established role and authority.
Company Practices-Evidence of how James's role as branch manager usually
entails such responsibilities and transactions.
Demonstrating Reasonable Reliance
Reasonable Expectation: Nancy must prove that Cycle for Life (Pty) Ltd reasonably
relied on James’s apparent authority when concluding the contract. Factors include:
Consistency with Past Dealings- Cycle for Life (Pty) Ltd had no reason to doubt
James’s authority based on prior dealings.
Role and Actions- James’s actions and position within the company suggested he
had the authority to make the purchase.
3. Relevant Case Law
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