PREFACE Ever since I began to lecture Business Law at Trust Academy, I was bothered and disturbed by the dearth and scarcity of study material for this course. The desperation of the students, their participation in class together with the labour I invested in looking for and convivially studying the materials in order to teach this course have all compelled me to come up with this study guide. This module is not intended to be and is not, neither can it be, an exhaustion of the Business Law Course. It is a mere study guide intended to provoke much study of Business Law. My prayer is that it may cure the reader’s ignorance on this course. One writer once said “The purpose of education is to replace an empty mind with an open one.” May the God of the Christian Bible bless you and give you enlightenment and wisdom as you flip through the pages of this module. **Any reference to masculinity (he) also imports a feminine meaning(she).

April, 2003 Innocent Maja [contact – 023 895 124] (Lecturer of Business Law at Trust Academy)

ACKNOWLEDGEMENTS I am indebted to the God of the Christian Bible, through his Son Jesus Christ – the Messiah, who is the quintessential fountain of my limited wisdom.


CONTENTS Chapter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Topic The Legal System The Law of Contract Contract of sale Law of agency CREDIT AGREEMENT INSURANCE NEGOTIABLE INSTRUMENTS PARTNERSHIP LABOUR SECURITY COPYRIGHT CONSUMER LAW LEASE INTRODUCTION TO CORPORATE LAW INSOLVENCY Page 4 12 23 33 38 41 45 52 54 61 66 73 77 83 101


is the only body of rules governing human conduct i. is not a law at all.. An unjust or immoral law.g. it should conform to some higher moral or just standards. Also in Myres V Leviton. 3 1949 (1) SA 203 @204. It is arguable that the natural theory’s conception of law is misleading because not all laws are moral or just 4. This does not mean that there are no sanctions as far as other practical laws are concerned. 4 The concept of justice is elusive a subject to debate. There is no person whose presence and natural affection can give the child the sense of security and comfort that a child derives from its own mother. in the strict sense. But only law in the strict sense is enforced by the courts of law or some other organ of the state. “An Introduction to South African Law” Pages 3-4. pressure or public opinion. though passed by the state. Fuller (etc) contend that every law should conform to some higher principles of justice. 1977 IP 83. There is the conscience of the individual.e. For example a person cannot be held personally responsible for failing to help a person in need (e.” Natural law therefore presupposes that for a law to valid. for it to be valid. What qualifies them to be law is the element of state enforceability. Finnis. This school of thought is based on the Latin maxim “Lex ir usta non est lex” (An unjust law is no law at all). This means that apart from state enforceability. It is pertinent to note that a rule or regulation cannot qualify to be law because of its effectiveness or goodness but only because the state says it is law. in Corbett V Corbett. The idea of a higher law is still used by judges in our day in resolving controversial cases which raise moral questions.” Of course. What is law? Law refers to a system of rules and regulations that govern human conduct and societal relations and are enforced by the state. For instance. 1 2 In their book. Natural Law Theorists like Cicero.2 the court held that a marriage between a man and a person who had undergone a sex change was a nullity since it was against the natural and biological determining order of a marriage. social approval or disapproval. recognized as binding by the state and if necessary enforced. 4 . a drowning person or one involved in an accident). Aristotle. Hahlo and Kahn1 convincingly contend that:“Law itself.CHAPTER 1 THE LEGAL SYSTEM What is a Legal System? It is the sum-total of law and the way it is made and enforced and the institutions that are involved in law-making and enforcement. St Thomas Aquinas. Note – there are many rules and regulations that govern societal conduct but not all of them are law. morality etc. John Locke. Justinian. Grotious.3 it was held that “There is no person who quite takes the place of a child’s mother. laws should be moral or just.

it is discernible that law “is a system of rules and regulations that govern human conduct and societal relations and are enforced by the state. it is arguable that natural law theorists deal with the question of what law “ought to be” and not what law is. John Austin. Hans Kelsen etc.’ iii) The Judiciary – consists of the courts whose main responsibility is to interpret laws. but it still remains law because the state says so.This law is inconsistent with the parable of the good Samaritan in the Christian Bible in Luke 10 Verses 25-37. From the above. in particular. The state or government is divided into 3 namely:i) The Executive – this consists of the president and cabinet. Layout will simply be given on what constitutes the state. The legislature is responsible for making laws which are called statutes or ‘Acts of Parliament. a rule of law may be morally iniquitous. ii) The Legislature – consists of Parliament and the President. However the concept of justice is elusive and attracts a lot of debate which I will not deal with in this book. but it does not follow that a criterion of legal validity must include expressly or by implication. Positive theorists – like Hart. argues that “It may be that a legal system ought to show some conformity with justice or morality. Professor Hart 5. Jeremy Benthan. any reference to justice and morality. Again one person once referred to homosexuality as “moral decadency” yet South African laws allow homosexual relations and marriages. Like Hart.” Business law thus becomes the branch of law which governs commercial transactions. The Concept of the State Having qualified that the state determines what law is.” Thus.convincingly contend that law is law despite its moral content. These laws do not cease to be laws because others view them as morally unjust. Attention will not be devoted to proponents of the social contract or the Marxist conception of the state. They are responsible for formulating policy and drafting bills which are presented to Parliament for debate. it is pertinent to define what the state is. “The Concept of Law.” 5 . Purpose of Law 1) To maintain peace and order in society – this functions is crucial in that it prevents chaos 2) To do justice – applies to some laws. It is submitted that the positive way of thinking reflect clearly what law is. Law should thus emanate from these 3 arms of the state. One American judge commented:5 in his book.

the prevalent moral and political views have had a great deal to do with the law than anything else. It regulates the rights and duties of persons.“The life of law has not been logic but it has been experience. However. On the other hand.” 3) To enforce morality – law has some moral fibres but not all laws are moral. it may be generally stated that private law enshrines private interests. Divisions of Law 1) Public and private law The destinction is not easy to make. public interests (rights and obligation of the state vis a vis private persons) are governed by public law. on the other hand. The felt necessities of time. It is the prerogative of the aggrieved individual to institute a delictual action either on his own or through a legal practitioner of his choice. A delict. A criminal action is instituted by a state or public prosecutor on behalf of the aggrieved party. is a wrong committed against an individual and the main relief is compensating the victim for loss suffered. 2) Criminal Law and Civil Law (Delict) A crime is a wrong committed against the state and punishable by the state through either imprisonment or a fine or both. 3) International and national law National law refers to a body of rules perculiar to a particular country or state while international law refers to rules which are binding on states 6 .

general law relates to common law and statute law whilst customary law refers to African Customary Law. the nature of the rights and duties. That particular nation has to ratify international treaties and incorporate it into a statute for public international law contained therein to apply. In other words. steps to be taken in enforcing rights. 5) General and Customary Law As will be discussed. 6) Common. civil and equity 7 . 4) Substantive and procedural law Substantive law deals with specific legal rights and duties of persons. Procedural law. It is sometimes referred to as adjectival law and includes the law of civil and criminal procedure and evidence. on the other hand. a foreigner) **Public International law does not automatically become part of the laws of a nation.g. how they are distinguished or constituted and their legal affects.e.and their relations with one another (This is sometimes referred to as public international law to distinguish it from private international law which deals with the exercise of jurisdiction by national courts in matters involving a foreign element e. comprises of rules which govern the enforcement of rights i.

there are mainly 5 sources of law namely:i) Legislation ii) Common law iii) Judicial precedent aka case law iv) Custom v) Authoritative texts Legislation Refers to rules of law that are made by the legislative authorities of the state. In Zimbabwe and South Africa. 8 . Equity refers to a branch of law which was administered by the King and his court (called the Court of Chancery) to alleviate the injustices stemming from the common law. SOURCES OF LAW For a rule to become law. it has to be derived from a sources recognized by the state. In England. In terms of hierarchy of sources. legislation is the most important source of law because it emanates form an elected body and in terms of democracy ‘Law should be made by the people’s representatives. there is also reference to the law of Equity.The term ‘common law’ can be used to refer to legal systems derived from English law.

Banking Act etc. Statutes are ranked in order of their superiority as follows:i) Constitution It overrides all other law in the country inconsistent with it. to the extent of the inconsistency. Labour Relations Act (chapter 38:01) or Deeds Registries Act (Chapter 20:05) 9 . that other law shall. be void.Section 32 of the Zimbabwean Constitution provides that the legislature is made up of Parliament and the President. iii) Statutory Instruments or by-laws This refers to laws passed by either the president or ministers or local authorities in terms or powers delegated to them by Parliament. Labour Relations Act.g.g. * Statutes may be cited in either of the following 3 ways i) By reference to chapter e.” ii) Acts of Parliament Acts of Parliament are laws that are passed by Parliament e. Section 3 of the Zimbabwean Constitution provides that:“This constitution is the supreme law of Zimbabwe and if any other law is inconsistent with this constitution.

Roman-Dutch authorities are therefore binding on the courts in South Africa and Zimbabwe except where 10 . the English judges applied the English law of Equity. Labour Relations Act. The law that was applied at the Cape on 10 June 1891 was Roman-Dutch law with English Law graftings. Now the law that was applied by the British at their colony (Cape of Good Hope) was largely RomanDutch Law (Roman law plus Dutch customs). The development of Roman Dutch law was based on the writing of jurists like Grotious.g. Section 89 of the Zimbabwean Constitution refers to it as the law that applied at the Cape of Good Hope on 10 June 1891. Infact it was Simon who coined the term RomanDutch law. 1985 (Act No 16 of 1985) Common Law Zimbabwe and South Africa’s common law is based on Roman-Dutch Law. Simon Van Leeuwin and Johannes Voet. in difficult or ‘hard’ cases.g.ii) By reference to the short title which includes the calendar year in which it was enacted e. 1985 or iii) By reference to the short title plus a full citation showing the number of statutes in the calendar year e. Labour Relations Act. However.

predictability. convenience and certainty in law – it being argued that “like cases should be treated alike. The justification for this approach is consistency. However. The general rule is that the decision of a superior (or higher court in rank – to be discussed when talking about the Court Structure) are binding upon inferior courts. English authorities are of persuasive value only unless it is shown that English law was already part of the law at the Cape on 10 June 1891. This is referred to as stare decisis in Latin. that rule of law would be followed. uniformity. NB – Roman Law Simpliciter is not directly relevant because the law applicable at the Cape was RomanDutch Law. where there are conflicting Roman-Dutch opinions and if the Roman Law on the point is clear.” According to Hostein. reliability. Judicial Precedent /Case law This refers to decisions passed by the court. “the idea of precedent suggests the resolution of questions today in the same manner as they were decided yesterday either because it is convenient to do so or because it is a 11 .” Stare decisis literally translated means “to stand by the decision and not to disturb settled points.they are shown not to have been applicable on 10 June 1891.

e. a proposition of law mentioned by a judge which has nothing to do with the case at hand) is called Obiter 12 . A proposition is binding if:a) It is a proposition of law and not fact.”6 It is not everything in the previous cases that is binding. E.g. the decisions of the supreme court are binding on the High Court and conversely. d) There are no relevant differences between the cases NB The ratio decidendi has been described in the following terms:“The ratio decidendi of a case is any rule of law expressly or impliedly treated by a judge as a necessary step in reaching his conclusion”7 A proposition of law that is not necessary for the decision (i. b) It was decided in a court whose decisions are binding on the court that is deciding the case.means of profiting from the accumulated wisdom of the past or because it ensures certainty …. the reason or principle upon which the decision is based.e. c) It forms part of the ratio decidendi of the case i. the decisions of the High Court are binding on the Magistrates Court.

This means that whenever a similar case comes before the Supreme court. 7 6 It is important to note that a court is not bound by its own decisions. In Katekwe V Muchabaiwa. The obiter dictum is not binding but is of persuasive value. the Supreme court decisions are binding on the High Court and not on the supreme court. For instance. 8 1984 (1) ZLR 112.g. 13 . they can change their previous decision.Page 386 See Cross & Harris – Precedent in English Law (4th Ed) 1991 – page 72 dictum. 8 the Supreme court held that a father of an African female who has reached the legal age of majority (18 years) no longer had the right to sue for seduction damages under customary low in respect of that daughter. E. the father does not sue for seduction damages on behalf of the daughter but on his own because of demunition in the amount of lobola chargeable on daughter who had been seduced. The rationale was that under customary law. However in Magaya V Magaya the Supreme court overruled the Katekwe decision by holding that such a father has a right to sue for seduction damages.

the person who is supposed to answer a claim is called the Defendant or Respondent if it is an appeal. On the other hand. not recorded in writing. In an ordinary case. His name is the one which first appears when citing a case. In this case it is Dera.******************************************* ***************************** NB – A case is cited as follows: Zesa v Dera 1998 (1) ZLR 500. the person who brings the matter to court claiming a judgement against the other is called the Plaintiff. ******************************************* ***************************** Custom Customs are rules. This means that this was a matter between Zesa and Dera. you can find it in the 1998 volume 1 of the Zimbabwe Law Report at page 500. His name appears second. In this case it is Zesa. the person is referred to as the Appellant. When you want to read that case. it is a Supreme Court judgement. Generally. customs become legally binding when they satisfy the following requirements:14 . which become binding in the course of time through continual and uniform observance by the community in question. If it is an appeal.

g. For example. Professor Christie’s Business Law in Zimbabwe. COURT STRUCTURE Can be classified into two namely:1) Criminal courts and 2) Civil Courts For purposes of Business Law.i) ii) iii) iv) Reasonableness If they have been long established If they have been uniformly observed If they are certain Authoritative Texts This refers to textbooks written be renowned authors. modern textbooks have no inherent authority but may be regarded as persuasive authority. the standing of the author. the scholarly level of the piece of work involved and the convincing nature of the presentation e. However. Those are divided into 2 namely:1) Ordinary courts and 2) Specialist courts 15 . the writings of popular Roman-Dutch jurists. we will restrict ourselves civil courts. The persuasive nature of an opinion of an author depends on. inter alia.

Zimbabwe’s Ordinary Court Structure Supreme Court High Court Magistrates Court Community court Customary Court Village court South Africa’s Ordinary Court Structure Constitutional Court Supreme Court High Court 16 .

The Constitutional court is the one which deals with constitutional matters like relief for infringement of a human right which is provided for in the Constitution.Magistrates Court Customary Court In South Africa and Zimbabwe. the High Court is a court of first instance in all civil or delictual 17 . However. it can only be a court of first instance when dealing with constitution matters. the Supreme Court is presided over by judges (so is the High Court and the Constitutional court in South Africa) whilst the Magistrates court is presided over by a magistrate. the Supreme Court deals with appeals from the High Court only. Conversely In South Africa the Supreme Court only handles appeals from the High Court. Both in Zimbabwe and South Africa. In Zimbabwe. The Customary courts are presided over by either a chief or herdman.

small claims courts deal with matters involving small claims of not exceeding $50 000. Appeals from the 18 . Similarly. The Magistrates Court deals with civil matters with a monetary jurisdiction not exceeding $200 000. NB . Customary courts deal with customary issues not exceeding $50 000.Matters relating to the dissolution of a civil marriage or interpretation of a will can only be heard in the High Court. Customary courts deal with customary disputes with claims not exceeding $50 000. Its monetary jurisdiction is The Income Tax Court deals with matters relating to income tax alone. the Labour Relations Tribunal deals with labour disputes only. The Small Claims Court deal with small claims up to $50 000. For instance. Specialist courts These are courts set up for a specific purpose and they deal only with those particular matters for which they are set up. Administrative courts preside over land disputes only. It also handles appeals form the Magistrates Court. Ordinary Courts deal with both customary and general law claims. In the same regard.

Administration. Income Tax. Water Courts and Labour Relations Tribunal go to the High Court. For an agreement to qualify as a contract the following essential elements should be satisfied: (1) Consensus ad idem . In the case of Smith v Hughes1 the court had this 1 [1871] 6 QB 597 19 .means the meeting of the minds of the parties to the contract. CHAPTER 2 THE LAW OF CONTRACT A contract is a legal agreement. The meeting of the minds can be express or implied from the conduct of the parties.

The party who has made the representation is precluded from denying that he assented to the terms of the contract. This is called the principle of Estoppel.” This law is known as "Quasi-mutual " assent.This refers to an intention to be legally bound. The court held that there was no contract because a social agreement lacks an intention to be legally bound. {4} Clarity/Must not be vague 2 1962 (3) SA 207 T 20 . {3} Possibilty to perform Whatever parties agree to should be within the capability of human beings to perform. In Kantor v Kantor2 the husband called his wife to make an agreement for lunch which he failed to honour. then he is bound. Anything short of this is null and void. The question before the court was whether this gave rise to a valid say about agreement by conduct “if whatever a man’s real intention may be he conducts himself in a manner that makes another party believe that he is assenting to a term of the contract. {2} Animus Contra hendi . Social agreements are not contracts in the legal sense of the word because they lack an intention to be legally bound.

In the case of Sasfin (Pty) Ltd v Beukes3. administration of justice (Bribe ) and the state interests and contracts that are contra bonos mores (contrary to good morals) As a general rule illegal contracts are not enforceable at law. This is called exturpi causa.The terms of the contract should be clear and not vague. {6} Legality Every contract has to comply with the provisions of the law. For example. {5} Formalities Some contracts need to comply with formalities e. [b] Common law illegality – This is when a contract contradicts public policy. Illegality comes in two forms namely: [a] statutory illegality – this is when a contract contravenes a statute. 21 . a mortgage bond has to be reduced into writing and registered with the Deeds Registries Office for it to be binding to the parties. Generally contracts can either express or oral. Where value has changed hands in a illegal contract the law provides 3 1989 (1)SA 1 (A).g. contracts injurious to the institution of marriage. contract contrary to public policy was defined as an agreement that run contrary to socially accepted norms.

In order to facilitate his adulterous affair and to circumvent the municipal regulations. 4 1986 (1) ZLR 103 22 . The question that the courts had to determine was whether or not Dube was entitled to his claim since this was an illegal contract. There were Municipality regulations to the effect that a person was not allowed to own more than one house in Bulawayo. The court thus ordered Khumalo to transfer the house in Dube’s name. this is not a rigid rule. Dube already had a house. It is subject to the following exception: (1) Unjust enrichment action – courts have come to realize that no party should benefit unduly even where therein is an illegal contract. their relationship soured beyond reconciliation and Dube demanded his house from Khumalo. Dube bought a house and registered it in Khumalo’s name. The court held that the contract was illegal but the unjust enrichment principle had to be invoked to prevent Khumalo from unduly benefiting. In the case of Dube v Khumalo4. As time went on. However. Dube was in an adulterous affair with Khumalo. fairness and equity that no party benefits even from an illegal contract. It is in the best interests of justice. This is called in pari delicto.that loss lies where it falls.

CONTRACTUAL CAPACITY . {2} Conditio sine causa – payment without cause 7. they should have reached the legal age of majority (21 and 18 years in South Africa and Zimbabwe respectively) .The unjust enrichment action comes in two forms namely: {1} Conduction indebiti – payment under a mistaken belief that payment is due.For a contract to be valid the parties must have the capacity to enter into legally binding agreements (locus standi in judicio). the power to enter into commercial transaction is found in the memorandum and articles of association and partnerships are regulated by a partnership deed. {2} Natural persons – for natural person to enter into binding contractual relations. They can enter into binding contracts through their agents. The law recognizes two types of people namely: {1} Artificial persons – These are companies or business organisations which are given corporate status in order allow them to transact business. With companies.The following people are disqualified from entering into binding contractual relations: 23 .

However.5 a 20 year old who operated his own account paid rent and was responsible for sustaining his parents was held to be tacitly emancipated. Once a minor is declared tacitly emancipated. [b] Insolvents – are persons who accrues more liabilities than what their assets can pay for. This is called Exceptio non admpleti contractus. The 5 1956 (2) SA 11 (N) 24 . NB – an emancipated minor is the one who is no longer under the control of his or her parents. a minor will be bound if there is unjust enrichment or if he misrepresents his age.[a] Minors – are persons who have not yet reached the legal age of majority. The major is bound by that contract whilst the minor is not.He can enter into binding contracts without the assistance of parents or guardian. In the case of Dickens v Daley. he is given majority status. Those between 7 and 18/ 21 need assistance from a parent or guardian but can enter into binding contracts if they are tacitly emancipated. Children between the ages of 0-7 have no contractual capacity at all. The general rule is that a minor cannot enter into binding contractual relations without the assistance of a parent or guardian. When a major enters a contract with a minor. such a contract is called a limping contract.

[d] Mentally retarded persons . Marriages are classified into two namely: {1} Marriage in community of property .general rule is that these cannot have contractual capacity at all unless they are assisted by a trustee. [c] Prodigals – these are people who fail to run affairs because of their propensity to squander. They are not allowed to enter into contractual relations in respect to their property unless assisted by a Curator. He can enter into contracts in relation to the estate without the consent of his wife. [f] Married women: the contractual capacity of women is determined by the type of marriage that they enter into. The husband is the administrator of the estate.these are marriages where the husband and the wife have a joint estate. [e] Drunkards – cannot enter into a valid contract when drunk. 25 .Once a person is declared insane according to the Mental Health Act. In South Africa all marriages are presumed to be in community of property unless parties enter into antenuptial contract to the contrary. such a person does not have contractual capacity at all.

{2} Marriage out of property – the husband and the wife own property separately and the wife is allowed to enter into contractual relations in respect of her property. In Zimbabwe marriages are presumed to be out of community property unless parties enter into antenuptial contract to the contrary. 8. OFFER AND ACCEPTANCE >>For a contract to be valid, one party has to make an offer and other has to accept it. Christie defines an offer as a proposal of the terms of a contract. The offer has to be clear. However, it should be distinguished from an invitation to do business in that the former has a serious intention to be legally bound whilst the latter does not .As a general rule, advertisements and auctions are viewed as invitation to do business. These invite the members of the public to come and make offers. However, not all advertisements are not invitations to do business. In the case of Carlill v Carbolic Smoke Ball Company6, the company was selling smoke balls. They placed an advertisement in the newspaper to the effect at anyone who uses the smoke balls for 21 days and contracts influenza will be compensated by the company. The advertisement had the statement

[1893] 1 QB 256


“anyone who uses our smoke balls per instruction and contracts influenza will be paid 120 pounds as compensation. 1000pounds has been deposited into the bank to show our sincerity in this matter.” The court had to decide whether this advertisement amounted to an offer. The court held that it did since the company had committed itself to pay the affected parties by depositing 1 000 pounds into a bank account. Types of offers (1) Option – this is when 2 parties agree to keep an offer open for a specified period of time. If the offeree does not accept the offer within the stipulated time, then the offer can lapse and the offeror can make an offer to a 3rd party. But if the offeror offers a 3rd party before the stipulated time elapses, he will be in breach of the offer and he will be liable to pay damages. (2) Right of first refusal or preemptive right – this occurs where one party does not want to make an offer but promises the other party that in the event of him deciding to offer, he will offer the other party first. If he offers another party at the material time, then he will be considered to be in breach of the preemptive right and will be liable to pay damages.


**Before an offer is accepted, it can be revoked. At times it can lapse in any of the following circumstances: (a) If the person who offers dies. (b) If it is for a specified period of time and the said time elapses. (c) If contractual capacity is negated. (d) If parties agree that the offer lapse. (e) If it is expressly rejected. ACCEPTANCE : the offeree should accept the offer. It’s a general rule that a counter offer does not lead to the conclusion of a valid contract e.g. if A sells his radio to B for $10000 and B proposes $9500. This amounts to a counter offer. The effect is to nullify the original offer. It will be up to A to accept the new offer for a contract to come into being. If B later on accepts $10000 no contract will come into being because there will no longer an offer to accept. Acceptance should be communicated. It is a general rule of the law that if an offer is made by post, it should be accepted by post if the mode of acceptance is not specified. However when acceptance is by post a valid contract is bought into being when the letter is posted irrespectively of whether or not the offeree received the letter of acceptance. As regards acceptance

The same applies to acceptance by fax and E-mail both of which are instantaneous communication pathways. They are easy to prove in a court of law. a valid contract comes into being when the other party hears of the acceptance. However. As regards implied terms. It is subject to the following exceptions: {1} when the words used are ambiguous. TERMS OF CONTRACT these can either be express or implied. {2} when words are used in a technical sense. external evidence will be admitted to give meaning to such words. this is not a hard and fast rule. This rule provides that no external evidence should be interpreted when interpreting express terms.through a telephone. Express terms are those that are expressed by the parties and are usually expressed in writing. Courts usually use the parole evidence rule to interpret expressed terms. these are terms that are not reduced into writing but are read into the contract 29 . external evidence will be admitted to give meaning to such words.

For instance section 22 of the Hire Purchase Act provides that a buyer cannot waive his rights under the Act. the Banking Act does not provide for a right to charge interest on overdraft facilities but this is derived from the customs and practices of the bankers and are usually read into the contracts which offer overdraft facilities. and the landlord increases this amount verbally without altering the agreement and the tenant pays. the new amount paid will be read into the contract as the new rental amount. if the landlord and his tenant write in their lease agreement that rent will be $20 000 per month.either because of the conduct or the law or trade usage. For instance. TERMS IMPLIED BY FACTS These are terms that are not reduced into writing but are read into the contract through the conduct of the parties. It is a general rule that when law that minors should be represented by guardians and insolvents by trustees when entering into a contract. Terms implied by the law These are terms that are read into a contract by statutes. For example. 30 . Terms implied by trade usage These are customs that are adopted by a certain profession that may not be part of the contract. This provision will be read into every Hire Purchase contract to prevent buyer from waiving their rights.

VOID AND VOIDABLE CONTRACTS A void contract is one that is not enforceable at law because it lacks one or more of the essential elements of a valid contract. They come in the following forms: (1) SUSPENSIVE CONDITION -This suspends the operation of a contract until the occurrence of an uncertain future event.Conditions Terms of contracts which make the operation of a contract dependant on an uncertain future event. For instance. On the other hand. For example. A can agree with B that he will sell his house if B secures a loan from the bank. parties are prevented from either hindering or deliberately facilitating the occurrence of the uncertain future event. A and B can agree that their lease of agreement will terminate if B marries. This is called fictional fulfillment. **However. {2}RESOLUTIVE CONCLUSION – it terminates a contract upon the occurrence of an uncertain future event. a voidable contract is one which has all the essential elements of a valid contract but can be set aside at the instance of 31 .

Ranger bought a house with a swimming pool from Wykerd. Ranger discovered that the crack was major and he lost R22 000 in repairing it. the Plaintiff noticed a crack in the pool which the Defendant assured him that it was minor. undue influence and mistake. upon occupation of the party on the basis of duress. misrepresentation. The court held that the Defendant had lied to the Plaintiff and that the plaintiff had the right either to uphold the contract and claim for damages or set aside the contract. He then brought an action against the Defendant on the basis of fraudulent misrepresentation. In the case of Ranger v Wykerd. It comes in three forms [a] Fraudulent misrepresentation – this is when a person utters a statement of material fact either as a deliberate lie or not believing it to be true. Upon inspection of the premises. FACTORS VIATING A CONTRACT {1}MISREPRESENTATION: this is when one of the parties utters a false statement which induces the other party to enter into a contract which he didn’t want had he known the actual facts. The court further held that since fraud was a delict (a wrong committed 32 . However.

[b] Negligent misrepresentation – this is when a person utters a statement of material fact without taking necessary steps that a reasonable person should take to ascertain the truth of the statement. Bayer assured Frost that the wheat and onions would not be destroyed in the spraying process. In the case of Bayer South Africa Pvt Ltd v Frost8. The test for negligence is whether a diligens paterfamilias (or reasonable person) placed in the position of the accused party would have acted in the same way as the accused. It was discovered that the company had never sprayed vineyards which had onions and wheat intermingled using a helicopter before. the 2 parties agreed that Bayer would spray Frost’s vineyard which had onions intermingled with wheat using a helicopter.against an individual). If yes. However. The court found them negligent and further held that negligence was a delict which attracted delictual damages. the Plaintiff was entitled to claim for delictual damages. then there will be no negligence but if not. Neither had the company taken any steps to discover whether or not this was possible. these were destroyed when the vineyard was eventually sprayed. then the accused will be held to be negligent. 8 1991 (4) SA 559 33 .

[2] DURESS Occurs when a person is forced into a contract through violence or threats of violence. the Plaintiff was forced to join the army by threats of death both on his person and his family. The remedy for duress is rescission of contract or a claim for damages if any loss has been suffered.[c] Innocent misrepresentation – occurs when a person utters a false statement believing it to be true. In the case of Broodrick v Smuts9.That he was prejudiced. The usual remedy is rescission of contract.The other party was induced into entering the contract which he would not have entered into had it not been for the threats. The court held that a party pleading duress should prove the following: . 9 1942 TPD 47 34 . This is when a contract is set aside and the parties are restored to the status quo ante (the position they were before entering into the contract). The court had to set aside the contract on the basis of duress. .that there was a threat of imminent danger either to the person or family or property of the other party. .

the Appellant only transferred 3 of the 4 farms and kept one for himself. In Preller v Jordan10. (b) The dominant party must have used his influence in an unscrupulous manner. When the Respondent recovered. (c) The weaker party’s power of resistance must have been weakened and his made pliable. However.[3] UNDUE INFLUENCE This is when one party is induced to enter into a contract by another because of a relationship of trust that exists between the 2 parties. for example doctor and patient. the Appellant was entrusted with the responsibility to transfer 4 of the Respondent’s farms to the Respondent’s wife and children when the Respondent was very sick on his deathbed. 35 . The essential elements of undue influence are as follows: (a) There should be a relationship of trust between the parties concerned. he brought an action for the recovery of the farm on the basis of undue influence. 10 1956 (1) SA 183. The court held that the Appellant had used his position to deprive the Respondent of his farm and the contract had to be set aside.

Mistake comes in 2 forms namely: (a) Unilateral mistake – occurs when one of the parties is labouring under a misapprehension of a material fact of the contract.(d) The aggrieved party should have been forced to enter into the contract which he would not have entered into had it not been for the influence. (e) He should have been prejudiced in doing so. The principal admitted him mistakenly believing that the Zambian certificate was equivalent to 5 ‘O’ Levels. The principal tried to set aside the contract on the basis of mistake. He applied for a cookery course at Polytechnic which required 5 ‘O’ Level. In the case of Mabhena v Bulawayo Polytechnic11. The court held that it was not a justified mistake and refused to set aside the contract on the basis of unreasonableness 11 HC 22/94 36 . the Plaintiff had a Zambian Ordinary Level Certificate equivalent to 3 ‘O’ Levels. [4] MISTAKE This refers to an error of a material fact made by one or both parties that influenced parties to enter into a contract which he or they could not have entered into.

the Plaintiff had seduced the Defendant’s daughter who was a major and made an undertaking to pay for seduction damages. This was illustrated in the case of Dickinson Motors v Oberholzer12. He paid it to obtain a car which both parties thought had been sold by the appellant to the Respondent’s son on Hire Purchase terms. He later on discovered that the law no longer permitted the father of a daughter who had reached the legal age of majority to 12 1952 (1) SA 443 37 .(b) Common mistake – this occurs when both parties are in error concerning a material fact of the contract. The general rule is that such a contract is void and unenforceable. The Messenger of Court had attached the 2nd car thinking that it was the first and it was delivered to the Appellant for repossession. **It is important to note that mistake or ignorance of the law is not an excuse. In fact it was a different car. It was held that the respondent could recover the money he had paid under a common mistake. The Respondent had paid 291 pounds to get the car back. Facts – Mr Oberholzer sued the appellant for repayment of the sum of 291 pounds which he alleged to have paid in error. In the case of Ncube v Ndlovu. which belonged to Alris Motors from whom the Respondent’s son had bought it on Hire Purchase terms.

These are terms of the contract which seek to exclude or limit the liability of one of the parties to the contract. (2) The meaning of the exemption clause – the exemption clause can be enforced if it is clear. it will be enforced against the person who drafted it. courts focus on 2 issues when dealing with matters relating to exemption clauses namely: (1) Whether the exemption clause is part of the contract. 38 . 13 1958 (2) SA 465. But if it is ambiguous. If it is.sue for seduction damages in respect to that daughter and tried to set aside the contract on the basis of mistake of the law. Usually. ** There is a general principle that says that if a person signs a document. then it will be enforceable. EXEMPTION CLAUSES. This is referred to as the contra proferentem rule. This is referred to as the caveat subscriptor and was reiterated in the case of George v Fairmead13. The court held that mistake or ignorance of the law is not a valid ground at law to set aside a contract. he will be bound by the contents of that particular document.

(3) The aggrieved party must be the one to prove that it was unreasonable.Covenants in restraint of trade A covenant in restraint of trade is a term of the contract where the covenanter undertakes that he will not engage in a specified trade or with specified persons for a specified period of time. It is normally found in employment contracts where the employee undertakes that if he leaves his employer. (4) The reasonableness of the covenant is determined at the time the court makes a dec sion 14 15 1988 (1) ZLR 365 1984 (4) SA 874.A) (Pty) Ltd v Ellis15. they are valid. he will not engage in the same business competing with the employer. This is based on the principle of freedom of contract which allows parties to enter into any contract of their choice. 39 . (2) It cannot be enforced if it is contrary to public policy. In the Zimbabwean case of Book v Davidson14 which followed the South African case of Magna Alloys and Research (S. the court gave the following guidelines regarding covenants in restraint of trade: (1) That on the face of it (or prima facie).

(3) Novation – this is when the contracting parties replace an old contract with a new one. (5) The court has the power to enforce the reasonable parts and eliminate the unreasonable parts in the covenant in restraint of trade. For example.and not when the parties entered into the contract. This is called the blue pencil test. It comes in the form of cession and delegation. a contract will be terminated. (2) Agreement – both parties can agree to terminate the contract and the court will effect this. DISCHARGE OR TERMINATION OF CONTRACT A contract can be terminated in any of the following ways: (1) Performance – if both parties perform their obligations. (4) Set-off – usually occurs when both parties are mutually obligated to one another and the obligations cancel one another. if A owes B $1 000 000 and B has a radio worth the 40 . Cession entails the transfer of rights from one person to another whilst delegation entails the transfer of obligations from one person to another.

this is subject to the agreement of the parties. In this case. The Prescription Act provides that ordinary debts cannot be claimed after 3 years and debts owed to the state and mortgage bonds will not be claimed after 30 years. For all other contracts. (5) Merger – usually occurs when 2 companies are joined together to form 1 company. He will be responsible for upholding the deceased’s contracts. (6) Prescription – it would be unfair for one person to be sued for a debt years after taking that debt. The contracts that existed between the said companies will automatically be terminated. (7) Death – can only terminate a contract if the contract if of a personal nature. For example marriage. the debt can be set off. 41 .same amount. an executor will be appointed to administer the deceased’s estate. (8) Insolvency – can terminate a contract if the contract is of a personal nature. However. For all other contracts. the tenant replaces the landlord and the lease agreement will be terminated. a trustee or liquidator will be appointed to fulfill the obligations of the insolvent person (see notes on Insolvency). Merger may also happen when the landlord sells property under a lease agreement to the tenant.

to recover these amounts. He sought to defend himself on the basis of supervening impossibility. These circumstances are called casus fortuitus or vis major or acts of God.(9) Supervening impossibility – this occurs when performance of contractual obligations is made impossible because of circumstances beyond human capabilities. 42 . however. 3 days before the date of performance. the Defendant hired a hall for the purpose of holding a performance. The court held that the sickness was an act of God which entitled the Plaintiff to terminate the contract. In the case of Krell v Henry16. on the morning of the coronation ceremony. the king fell sick and the ceremony was postponed indefinitely (or sine die). The Plaintiff then refused to pay the money for the hotel suite and an action was brought against hi. the Plaintiff hired a hotel suite to watch the coronation of king Henry V11. Similarly. in the case of Cradwell v Taylor17. the hall in question was destroyed by fire. The Defendant refused to pay the booking fees arguing that the destruction of the hall by fire was a supervening impossibility which frustrated the 16 17 [1903] 2 KB 407 1971 (2) SA 184.

It is sometimes referred to as anticipatory breach. It comes in any of the following forms: (a) Mal-performance – this is when a party fails to perform either at all or in time or correctly. (c) Repudiation – this is when one party behaves in a way that makes the other party believe that he is going to terminate the contract. (b) Cancellation – occurs when one party terminates a contract prematurely. The remedies include: (1) Specific performance – this is when the innocent party will be asking the court to order 43 . BREACH OF CONTRACT.contract. (d) Mora debitoris – this is when the debtor fails to perform his obligations in a contract. (e) Mora creditoris – occurs when a creditor fails to accept the performance tendered by the debtor. The court upheld this argument and terminated the contract. Remedies for breach This refers to the relief given to the aggrieved party. Occurs when one or both parties violet a term or terms of the contract.

(2) Interdict – is an order either restraining a person from doing a particular act or compelling a person to do a specific act.the guilty party to fulfill his contractual obligations. They flow naturally as a direct consequence of breach 44 . [b] Mandatory Interdict – is an order compelling a person to do a positive act in order to remedy a wrong. (4) Damages – they are only claimed for financial loss. (3) Cancellation – this is when a party is allowed to set aside a contract. They usually come in 2 forms namely: (a) General or Consequential damages – these are damages that flow directly from breach. Unlike rescission of contract where parties are restored to the status quo ante. cancellation sees parties being placed to the position they would have been had the contract not been breached. Interdicts usually come in 3 forms namely: [a] Prohibitory Interdict – is an order restraining a person from doing a particular act. [c] Restitutionary Interdict – is an order compelling a person who has disposed another of his property to restore possession.

the guilty party is obliged to reimburse him for the amount expended in minimizing loss. 45 . **In practice however. However. However.(b) Special or Prospective damages – these are remote from breach. 2 tests are used to compute special damages namely: (1) The Contemplation principle – the question that the court usually asks is whether the loss was reasonably foreseeable. (2) The Convention principle – it provides that in addition to loss being reasonably foreseeable. parties should agree that the guilty party will compensate the innocent party in the event of such loss occurring. Mitigation of loss This principle provides that the innocent party should try as much as possible to minimize loss whenever it occurs. if the innocent party mitigates loss. courts have done away with the convention principle. The guilty party is not obliged to compensate the innocent party for loss which could have been easily avoided. then special damages will be granted but if not . If it was. This means that the binding principle for computing special damages is the contemplation principle. the special damages will be denied.

with the purchaser agreeing to pay a certain price (or pretium). 46 .CHAPTER 3 CONTRACT OF SALE The leaner should fully understand the following: Essential elements of a valid contract of sale Implied terms of the contract Modes of delivery Passage of ownership and risk Voetstoots sale Remedies for breach of contracts of sale DEFINITION A contract of sale is a legal agreement in which a person called a seller or vendor promises to deliver a thing (or merx) to another person called a purchaser.

Thus. As regards consent. 2. if property is unknown to the parties or is not in existence at the time of sale or ceases to exist at the time of the contract.” 47 . CONSENT The buyer and seller should be in agreement as to the thing sold and the purchase price. 1 in their book “A Handbook in Commercial Law In Zimbabwe.” Parties to the contract must be in agreement as to the subject matter of the sale.Four major essential elements of a contract of sale emerge namely: 1. SUBJECT MATTER (OR MERX) Manase and Madhuku1 define a merx as “any corporeal or incorporeal asset of some value. the general principles of contract apply. There should be an intention to sell and related intention to buy. Hence the merx should be clearly defined and ascertainable.

Fries v Ryes 1957 (3) SA 575 @ 581. certain and real” 2 3 see Hilliard and Westborne v Tabor Frost 1938 SR 89. PURCHASE PRICE (PRETIUM) Parties to a contract of sale must be in agreement to the purchase price of the merx. 48 .the contract becomes void for initial impossibility. binding if the non-existence of the property is attributable to one party or if the seller represented that the property exists. 4 1947 (3) SA 701. A contract of sale is however. the seller’s duty being to deliver the merx and guarantee against eviction.3 3. Partial destruction of the merx unknown to both parties does not affect the validity of the contract of sale as long as substantial performance can be made by the delivery of what remains against payment of a proportionally reduced price2. The sale of another person’s property was held to be valid. Cassimjee V Cassimjee4 held that the purchase price “must be in current money and it must be fixed.

If it is not stated clearly..-” In the case of Baxter V Maxwell6. Macey’s Consolidated Ltd V Chaseborough Ponds7 held that a sale of future goods at the ruling price at the time of the order being placed was valid as the ruling prices were readily ascertainable. the court held that the contract of the sale of milk at “ current wholesale rates” was void because the evidence showed that it was impossible to calculate the current wholesale rate in that trade at the time. an implied agreement to pay and accept a fair and 5 6 1998 (1) ZLR 541. it must be stated impliedly: there must be an agreed method by which the price can be ascertained .* Requirements were summed up by the Zimbabwean Supreme Court in the case of Chikoma V Mukweza5 where it was held that “There can be no valid sale unless the parties have agreed on a purchase price. * The moot question remains: whether in the absence of the sellers usual price or a ruling market price. On the contrary. 1923 SR 120 7 1967 RLR 253 49 .

No price was agreed between the parties.that despite the vague provision. HELD . HH 156/90 50 . Roman Dutch Law. In the court’s words “courts must strive to find what is fair and reasonable where prices are not mentioned in a contract of sale even 8 9 1972 (2) RLR 223. it being accepted that a reasonable price be charged.reasonable price gives rise to a valid contract of sale? This question was left unanswered in the case of Elite Electrical Contractors V Covered Wagon Restaurant 8where the court vaguely observed that “There is no general rule of contract that a contract to pay a reasonable price for goods sold and delivered is invalid”. However. FACTS – parties entered into a contract for the manufacture and sale of nuts. there can be no valid contract of sale at a reasonable price because it is difficult to determine a reasonable price. in Smith V Marketrite (Pvt) Ltd 9 the court held that as a general rule. sale at a reasonable price was valid because it was easy to determine or ascertain the price from the facts and circumstances of the transactions.

1927 AD 271 @ 282. 51 . it is simply an obligation to give vacua possession coupled with the further legal consequence of a guarantee against eviction”. courts assume that there is an implied agreement to pay a reasonable price10.if it means enlisting the services of experts to do it”. 4. where prices are not mentioned and there is no ruling market price. all what the purchaser is assured of is free and 10 11 1920 CPD 333. He is only obliged to transfer the merx. has no obligation to transfer ownership to the buyer. In Kleynhans Brothers V Wessels Trustee11 the court observed that “A contract of sale with us does not have the effect of a translatio domini (transfer of ownership). * English law provides that. PASSING OF OWNERSHIP Once a contract of sale is validly concluded. DELIVERY The seller has an obligation to deliver the thing under sale to the buyer in time. The seller however.

undisturbed possession of the merx (vacuo possessio). NB Ownership does not automatically pass. For it to pass, the following should be satisfied: a. The purchase price must be fully paid. b. The seller must be the owner of the merx. In law, one cannot pass on rights which (s) he does not possess. If a non –owner transfers ownership illegally the true owner of the merx always has the right to take back the merx from whoever possesses it. c. There must be an intention by the buyer to receive ownership. d. There must be delivery of the merx.

MODES OF DELIVERY Immovable property is delivered by registering the names of the purchaser on the title Deeds of the property in terms of the Deeds Registries Act12. As regards movable property, there are 2 main modes of delivery namely: 1) FISCAL / NORMAL DELIVERY

Chapter 20.10


This refers to the actual movement of the merx from the seller to the buyer.

2) CONSTRUCTIVE / FICTITIOUS DELIVERY This occurs where actual delivery is difficult, or impossible or unnecessary. Where fictitious delivery takes place, the merx stays where it is at the time of legal delivery and need to move. This delivery takes the following form: a. Symbolic delivery - here, the seller delivers some symbol of the merx and not the merx itself. E.g. handing over keys of the warehouse where the merx is stored. b. Delivery with the long hand - (Traditio longa manu) This takes the form of pointing out the merx by the seller to the buyer and giving the buyer the right to remove the merx at his own convenience. - This may occur where actual delivery is impossible because of the weight/bulk or the special circumstances eg Government regulations.

c. Delivery with short hand - (Traditio brevi manu) Occurs where the buyer is already in physical possession of the merx and subsequently takes possession as the owner. d. Constitutum possessorium - Occurs where the seller retains possession of goods but continues to hold the goods as an agent of the buyer. e. Attornment - Occurs when an agent has possession of the merx but continues to hold the goods not for the principal but for buyer. PASSING OF RISK - Risk relates to the destruction or damage of the merx or the profit of the merx. - Under Roman Dutch Law, risk generally passes to the purchaser immediately at the conclusion of the contract of sale. In legal terms, risk passes when the contract is perfecta. (Clear as to what is to be sold and the purchase price thereof). Exceptions to this rule include:


Where the parties agree that the risk rule does not apply. The buyer can however. measuring or counting the merx. 2. risk does not pass. the purchaser has to pay the purchase price 55 . Risk does not pass where pretium cannot be fixed without weighing. NB where risk has passed to the purchaser. This is because the seller is still the owner of the goods and has the locus standi to sue. If the seller is negligent or where he Intentionally damages the merx. Risk only passes where pretium is fixed. NB Where the merx is damaged by the actions of the 3rd party. Here risk remains with the seller. Risk does not pass where the sale is subject to a suspensive condition until the condition passes or is fulfilled. 3. sue the 3rd party for damages only If he has received cession of goods or the right to sue from the seller. In cases where risk has passed. 4. such risk will return to the seller if he fails to deliver the merx on time. risk is with the purchaser.1. 1.

then the seller is only responsible for willful acts and gross negligence. He is liable for any loss caused by his willful act or negligence. the seller must take proper care of the merx even if risk is not on him. DUTIES OF THE SELLER 1. 56 . If no time is stipulated. .even though the merx is destroyed and he cannot plead supervening impossibility. To take care of the merx – Before delivery. then he is allowed to cancel the contract. 2. Duty to deliver the merx – the merx must be delivered at the stipulated contractual time. then delivery must be effected within a reasonable time.The quantity delivered must not be more or less than what was contracted. Buyer’s remedies – He can claim damages. the buyer may reject it in toto or accept what has been delivered but pay its prorata value and proceed to sue for what has not been delivered. If delivery is late because of the purchaser’s fault. If more. But if damage of the merx is extensive.

. To guarantee against eviction . 3. acts or negligence of the buyer. The buyer would enjoy vacant possession of the merx. If the buyer had paid pretium. he has the right to reclaim it. Relevant Considerations of eviction . When threatened by 3rd parties. 57 .Eviction should not be due to the fault. the buyer may reject the whole package or may opt to sort them out but be paid damages for so doing.If he has been mixed delivery. the buyer must give the seller notice of the 3rd parties action so as to enable the seller to take over proceedings and defend whatever legal action on behalf of the buyer.If there is no delivery and delivery is material to the contract. the buyer may opt out of the contract with or without damages or he may seek damages or specific performance.all contracts of sale have an implied warrant against eviction ie the seller promises the buyer that he would not be disturbed in his possession of the merx. This is only irrelevant where the 3rd party’s superior rights to the seller are so glaring that notice would be considered absurd in the circumstances. .

b. the buyer must not give up possession voluntarily unless if the rights of the 3rd party are unassailable (obvious that they cannot be challenged). If it does not tally.the buyer must be given the opportunity to inspect the merx and see whether it tallies with what was agreed. the buyer was obliged to raise every defence available to defend title of goods NB The guarantee against eviction will not be implied in the following circumstances: a. Where it is within the buyer’s knowledge at the time sale is concluded that the 3rd party is the owner of the merx. * Under the Old Roman law. Where the cause of eviction arises after the sale and the seller is fraudulent.. 4. Its important to note that where the guarantee against eviction is breached. c. depending on the nature of the sale. The duty to guarantee against defects . Where parties expressly agree that the seller will not be liable in the event that the buyer is evicted. the buyer has a right to claim for recovery of the purchase price and other damages. 58 . the buyer may reject the merx and the seller will have failed to effect delivery.When threatened by 3rd parties.

the buyer’s remedy when a patently defective merx is delivered depends on whether the sale is one of ascertained or unascertained goods. ie the law assumes that the merx is sold free from defects which make it unfit for the purpose (ordinary or specific )it was sold/bought. inspects the merx when it is suffering from a patent defect cannot complain when the seller delivers the merx to her in the same defective condition. EXCEPTIONS 59 . at the time of sale. It is the seller’s duty to guarantee against latent defects. Patent defects – are those that must have been obvious to an ordinary purchaser at the time of sale. every agreement of sale has an implied warranty against latent defects. Latent Defects – are hidden defects at the time sale is concluded. then the buyer’s remedy lies in aedilition damages.Defects may take 2 forms namely: a. b. where there has been no inspection of the merx. However. In fact. If unascertained. A buyer who.

60 . Where the buyer is aware of the defect at the time of the sale or becomes so aware subsequently one expressly or impliedly accepts the position. The ordinary rule as to risk of the thing sold applies and the loss falls on the buyer. Where the seller expressly contracts out of liability by agreement with the buyer. Elston No V Dicker 13 13 1995 (2) ZLR 375 (SC). the buyer has no claim against the seller. If the seller knows that the goods are defective and fraudulently conceals this to the buyer. III. the goods are sold ‘voetstoots’ (or as they stand) and the buyer. IV.disclosure. Where the defect does not exist at the time of sale. the sale would not be considered Voetstoots. in contracting on this basis.I. Here the buyer can cancel the contract and seek damages or he can seek a reduction of the purchase price. he is taken to have waived his rights against the seller in respect of that defect. becomes bound by the term. Where the actions for claim of damages have prescribed. This is called fraudulent non. II.

but the seller described it as minor and said nothing more. Experts were called in to assess the damage and as a result. the appellant. It was clear from the evidence that the seller must have known of the defects at the time of the sale and deliberately refrained from disclosing them. Before the sale. They had been filled in as they appeared but not professionally. The buyer sued the seller’s estate for the expenses and succeeded in the High Court.that to establish the seller’s liability for the latent defect complained of. she must at least have appreciated 61 . After the buyer moved in. major cracks started appearing at the end of the rainy season. the buyer must show directly or by inference that the seller actually knew of the defect. had lived in the house for several years and noticed several cracks. which had been previously patched up and plastered over. major repair work to the foundations of the house was carried out. The sale was Voetstoots. On appeal the court held . All were old cracks. Her son.Facts – Dicker bought a house from Elston’s late mother. the buyer observed a crack in the building. which he said were progressive. Even if she had been aware of the exact cause of the cracking.

NB Where there is doubt as to whether a sale is voetstoots or not. there is a presumption against voetstoots. It is also presumed that a defect that manifests shortly after the sale existed at the time of sale.that there was something remiss with the structure. These come in 2 types namely: a. The purchase must prove the following: (i) That the defect is so serious as to render the property unfit for the purpose for which it was sold and bought. Buyer’s remedies – Come in the form of aedilition damages. bearing on the quality of the merx and going beyond mere praise and commendation) 62 . A redhibitory action is therefore available to the buyer who shows that the merx fails to live up to a dictum et promissium (This is a material statement made by the seller to the buyer during negotiations. (ii) That the buyer will not have purchased the merx had he known of the defect. Actio redhibitoria – This relief entitles the buyer to rescission of contract (or redhibition).

S. the buyer can make a claim under the actio quanti minoris. NB Where restitution is not possible. The action is normally brought by a buyer who is entitled to redhibit but decides not to do so for either of the following reasons (i) He may not be able to give restitution (ii) The defect in the merx may not be sufficiently serious to justify redhibition or rescission of sale. b.A Soil and Fat Industries Ltd V Park Rynie Whaling Co Ltd 14 14 1960 AD 400. Parties are restored to the status quo ante (the situation he was before he entered into the contract). The damages are usually measured by assessing the difference between the purchase price and the market value of the merx in its defective condition. (iii) Where the buyer is entitled to redhibit but does not.A redhibitory action entails restitution. insisting on a reduction of the purchase price. Actio Quanti Minoris . 63 .this means a reduction in the purchase price.

the court Held – that since some of the oil was used.Facts – The defendant bought from the plaintiff certain oil used for soap making. The reminder sperm oil was useless and the defendant incurred loss. Aedilition damages have been extended to compensate the plaintiff resulting from the defect if the seller actually manufactured the article himself or makes it his business to deal in such articles or publicly profess to be an expert in such articles Lockie V Wightman and Co Ltd 15 Facts – the plaintiff sued the defendant for the sum of £250 being damages suffered by her as a 15 1950 (1) SA 361. 3 Whale Oil but that which was delivered was a mixture of Whale and Sperm oil. The oil contracted was no. Hence the defendant was entitled to relief under the actio quanti minoris and the measure of relief was the difference between the purchase price and the actual value of the oil supplied. In an action for aedilition damages. The defendant separated the Whale from Sperm oil and used whale oil for soap making. 64 . c. The oil was delivered and most of the pretium was paid. restitution was not possible.

He can sue for specific performance or 65 . The fodder arrived to the Plaintiff packed very tightly in thick waterproof brown paper. intact and showed no sign of contamination. The seller can therefore have either of the following remedies: a. This is because merchants ought to sell good products. Duty to pay the pretium. The defendant company were dealers in produce including horse fodder. he would have committed a breach that goes to the root of the contract (or fundamental breach). Duties of the buyer 1. But where the merchant sells ‘works of his own manufacture or articles of which he professes to have special knowledge. he cannot escape liability even though he was not aware of the defect. Held – that the general rule is that the vendor or seller is not liable to the buyer for damages where he is ignorant of a defect in the article sold. The death was caused by the horse eating fodder containing arsenic.result of the death of her horse. 2. NB If the buyer neither accepts delivery nor pay the purchase price. Duty to accept delivery of the merx.

b. He can cancel the contract and claim damages. Since the Bill of Lading contains a description of goods which are being transported. Insurance and Freight and is normally used when goods are transported by sea transport. he is obliged to pay the pretium. The legal significance of a C.I.I. Normally the seller will take out a marine insurance policy and load the goods at the port of departure. He is allowed to sell the goods using the Bill of Lading. 66 . If goods are destroyed whilst afloat. When the buyer receives these documents. the buyer is obliged to pay the purchase price.F sale is that goods are sold whilst they are afloat. it necessarily follows that whosoever is in possession of the Bill is deemed to be the owner of the goods in question. He is then issued with a Bill of Lading which he sends to the buyer together with the insurance policy and the invoice for payment of pretium.F Sales – refers to Cost. SPECIAL SALES (1) C.

Here.The 3rd party must have been prejudiced. It is the responsibility of the buyer to take out an insurance policy and to pay for transport charges.OB sale – is the opposite of C.There must have been some negligence or fault on the part of the owner. this action is limited by the principle of estoppel. It provides that the true owner is prevented from denying that he assented to the disposition of goods if by his conduct he made a representation to that effect. 67 .The 3rd party must have acted in reliance on the representation. (4) C.O. 17 1956 (3) SA 420. .D sales – Cash On Delivery.(2) F. However.O. . (3) F. Grosvenor v Douglas17 convincingly held that the following should be satisfied for estoppel to succeed: .F sales. Vindication Provides that the true owner of goods has the right to reclaim his goods from whoever is in possession of them at the material time.There must also be a representation by the owner. The above principles apply. goods are transported Free On Board. .I.R sales – Free On Rail.

68 .

. It is referred to as the mandate. This is the main contractual relationship in the law of agency. Thus the relationship created is 3 fold namely: 1) Principal-agent relationship – which is contractual.Common law defines an agent as a person appointed by his principal to enter into contractual relations which are binding between the principal and the 3rd party.CHAPTER 4 LAW OF AGENCY . 3) Principal – 3rd party relationship – which is contractual.An agent is a person who represents another. 2) Agent – 3rd party relationship – which is not contractual save for certain circumstances. 69 .

.As regards juristic persons e.The basic essential elements of a valid contract should exist e. Companies. Companies .An agent should always be distinguished from an independent contractor who is not told how to carry out the mandate on his own account.g.g. contractual capacity of parties.It is pertinent to note that juristic or artificial persons can only act through agents e. .The essence of appointing an agent is to do a specific act which the principal finds very inconveniencing. one has to look at the Memorandum and Articles of 70 .As soon as the agent brokers the principal and the 3rd party by concluding a contract.The law of agency is based on the maxim “Qui facit per alium facit per se” meaning that “he who acts through another acts through himself”. he falls out of the picture. . .g.It is then logical to conclude that the law of agency is concerned with the relationship between the principal and agent and the relationship between the principal and a 3rd party. Agent – Principal relationship . .. difficult or taxing to do on his own.

Association to see the capacity of such a company and its officers to enter into contracts. . Authority . Some acts have to be done after producing a Power of Attorney.He should be authorised by the principal to enter into contracts Power of Attorney .This is a backing power given by the principal to the agent permitting the agent to stand in representative capacity.If an agent lacks capacity. . 71 . then the contract is void.This is a document signed by the principal authorizing the agent to do a specific act (in case of a Special Power of Attorney) or to do general mandates (in case of a General Power of Attorney). It exists in three species namely: (a) Express authority (b) Implied authority and (c) Ostensible authority or authority by estoppel. It specifies the agents authorized and the act to be done.

Express authority Is that authority found within the four corners of the agreement.g. Thus. the law or trade usage. .It then follows that the scope of the agent’s authority is governed completely by the wording of the Power of Attorney. in some cases the law provides that some persons should be represented by others without looking at the presence of an agent – principal relationship e. Another authority may be inferred from the conduct of the parties where such conduct admits no other interpretation besides that the parties intended the relationship of principal – agent to exist between them. It is also called actual authority. Implied authority – this refers to authority that is not found in the 4 corners of a Power of Attorney but can be inferred from either conduct. In most cases express authority is reduced in writing thereby constituting a power of Attorney. For such a contract to be valid. minors. Implied authority can also be found where an agent without actual appointment purports to act on behalf of a principal. 72 . the principal should ratify the contract provided that he has become aware of all the material facts of the contract.

His defense was that he was not a party to that contract of sale.Dreyer V Sonop1 Facts. NB Start a new paragraph from here. This was held in Mcllough V Fernwood Estates Ltd. The son was acting as his father’s agent and by asking for further details. Ostensible authority. the principal is not bound and the 3rd party is free to cancel the contract. Upon arrival of the invoice D demanded more details of the sale and was furnished with the same. He informed the seller to send the invoice to his father (Dreyer). Principle. In favor of the seller (Sonop). Ruling. he was a party and therefore obliged to pay. The principal on whose behalf the agent acts should be in existence because one cannot enter into a contract on behalf of a yet to exist company. A child who was Dreyer’s son took a school blazer from a shop after signing the invoice. the principal cannot ratify. 1 1951 (2) SA 397. For a contract to be rectifiable it should be valid where its null and void. D failed to pay and was sued. Dreyer had ratified the contract so. Where its’ ungratified yet ratification is necessary. 73 .

The work was done in a period of more than 2 months under the supervision of the school secretary who 2 3 in his book “Business Law in Zimbabwe. the representation of which is relied on by the 3rd party to enter into a contract. It occurs where the principal represents or conducts himself in such a manner as to suggest that the agent has express or implied authority. It is almost similar to implied authority but Manase and Madhuku aver that representation suggesting the presence of authority should be made by the principal yet in implied authority it is made by the agent. It is called agency by estoppel where the principal is estopped (stopped) from denying the existence of authority on the agent. Ben did some work at a Baptist school.This is an authority that is neither express nor implied.” SC 161/93 74 . It is authority be estoppel. Professor Christie2 convincingly argues that the difference between implied and ostensible authority is that implied authority is based on quasi mutual assent whilst ostensible authority is based on estoppel. The representation by the principal must mislead the 3rd party into believing in the existence of authority. Baptist Connection Zimbabwe – V – Ben3 Facts.

Ruling.bought the building material which was being used. The unnamed principal is one whose name or identity the agent has not disclosed but has disclosed his existence whereas an undisclosed principal is one the agent has not disclosed his existence resulting in a 3rd partly 75 . Principle. Baptist conducted itself in a manner as to suggest the presence of such authority. Ostensible authority is similar to apparent authority. In a dispute arising from the contract (non-payment of Ben for the work done). In favour of Ben. It should be stopped from denying giving the secretary authority. Undisclosed and unnamed principals The two must not be confused at all. By letting the secretary handle cash transactions and supervising the construction taking place at the school. Baptist denied the existence of authority on the part of the secretary. To plead estoppel the following factors should be established 1) There was a representation by the principal 2) Representation could mislead any reasonable person 3) The 3rd party acted on the representation 4) He was prejudiced by so doing.

He normally sells in his own name and on his own account (2) Del credere agent – is a factor or selling agent who guarantees the payment of the purchase price. 76 . He must be allowed a reasonable time to endeavor to obtain the guaranteed price. the owner can either demand that the agent sells the goods at the best price obtainable or recall the goods and sell them himself or he may claim the guaranteed price and abandon the goods to the agent. The 3rd party does not know that X is an agent. The agent of the undisclosed principal is bound by the contract on the basis of quasi-mutual assent.believing that he is dealing with the agent in his own capacity. TYPES OF AGENTS (1) Factor – refers to a person to whom goods are assigned for sale by a merchant residing abroad and at a distance away from the place of sale. But if such time lapses.

He is only entitled to commission if his principal concludes a contract with a willing and able buyer introduced by the agent. 77 . (4) Auctioneer – is an agent who sells goods by public auction.(3) Broker – is a middleman or intermediary whose office is to negotiate between 2 parties until they are ad idem as regards the terms they are prepared to buy and sell. Duties of the agent (1) To carry out the mandate – agents are bound to do what they contracted to do. (6) Negotiorum gestio or gestor – refers to a person who undertakes the business of another without the latter’s authority and in his absence. (5) Estate agent – is an agent whose normal modus operandi is to endeavour to find a buyer for his client’s immovable property.

He must not misuse confidential information. DUTIES OF THE PRINCIPAL 1) Duty to remunerate He is obliged to do so only if the agent did the assignment. it is a criminal offence for an agent to connive with a 3rd party to commit a breach of the agency-principal relationship. Neither should he allow himself to be in a position when his interests conflicts with those of the principal. He should pay reasonable remuneration if not expressly stated. In terms of section 3(1)(d) of the Zimbabwean Prevention of Corruption Act. 2) Duty to re-imburse and compensate the 78 . the test used is that of a reasonable person in the shoes of the person alleged to be negligent.(2) To exercise care and diligence in carrying out the mandate – here. ( Bloom’s case). (3) To impart information (4) To advise the principal (5) To act in utmost good faith – the agent should not make secret profits.

the principal should do so. 3) Duty to account or advise Where the nature of the transaction makes it indispensable for the agent to be furnished with information. Expenses and loss incurred should be within the scope of the mandate. The ways include: Mutual agreement between the parties. 79 . Renunciation: An agent on equitable grounds can renounce the agency without incurring any liability in damages.agent It is a requirement and compensate the agent who met genuine expenses or loss during execution of a mandate should be in indemnified by the principal. Revocation: The principal has such a right to revoke agency without attracting liability in the absence of an express or implied agreement to the contrary. Termination of agency Same as contract.

80 .NB Agency is a contract where in one party comes the principal engages the services of another party (agent) who in turn realizes remuneration called commission for doing a particular act called mandate.

leasing transactions or agreements having the same import whether or not such transactions are subject to suspensive or resolutive conditions (section 1 of the Act). These are akin to Hire Purchase Agreements in Zimbabwe. Hire Purchase Agreements are governed by the Credit Agreements Act no. The Hire Purchase Contract. The Credit Agreements Act.CHAPTER 5 CREDIT AGREEMENTS. Formation of a Credit Agreement Section 5(1) provides that a Credit Agreement should: 81 . The Act applies to movables. Applies to Credit Agreements which are defined as meaning credit transactions. It is a credit sale in which it is agreed that the price is to be paid in installments and ownership only passes upon payment of the last installment.75/1980 in South Africa.

if any. It is submitted that section 5(2) should be removed from the statute. the reservation and passing of ownership of the goods if it is an installment sale transaction. which the buyer may request in writing. . as to the seller’s right to the return of goods. it is surprising that section 5(2) provides that non-compliance with the provisions of section 5(1) does not render the agreement invalid. *Section 3(1) gives the Minister extensive powers regarding regulation of prices. ..Contain a description of the goods or services to which the agreement relates sufficient to make them readily identifiable. This implies that the provisions of section 5(1) should not be religiously adhered to.State the conditions.Be reduced into writing and signed by and on behalf of the parties. . **However.Be in the official language. . This is problematic since the use of should or shall in statutes impose mandatory compliance. .State the amount paid or to be paid as initial payment or initial rental.State the names and business or residential address of the credit grantor and credit receiver. installment and 82 .

. . If he takes possession without a court order.Exemption clauses for any act or omission of the seller’s liability.Forfeiture provisions. A credit agreement is not binding until the buyer has paid at least the initial payment or rental prescribed by regulations (s 6(4)) **Section 6 proscribes or prohibits the following provisions: . .Where the period of the credit agreement is left undetermined etc.It obliges the credit receiver to notify the credit grantor by post within 14 days any change of the residential or business address’ removal of goods and any partial loss of possession of goods under the credit agreement.advertisement of Credit Agreements. Consequences of a Credit Agreement .Exemption clauses for unlawful entry by the seller to the buyer’s premises. .If the credit grantor terminates the agreement without fault on the part of the credit receiver. . section 13 obliges him to return all installments 83 .A credit grantor cannot have repossession of the goods from the credit receiver without a court order. he is obliged to reinstate the credit receiver.

paid by the credit receiver. . Provides for the limitation and disclosure of finance charges levied in respect of money lending. **Section 23 imposes a penalty of either a fine not exceeding R5 000 or at most 2 years imprisonment for failure to comply with the provisions of the Act. **Section 22 prohibits any waiver of rights by the credit receiver under the Credit Agreements Act. the seller sells the goods to the buyer on behalf of the finance company. credit and leasing transactions. the finance company pays the seller the amount of goods in question. Usually. The Usury Act 73/68.Any summons issued by the credit grantor in legal proceedings has the effect of restraining any transfer or use of goods under the credit agreement (automatic interdict). Rights of the parties who finance the contract. The seller then cedes his rights to the goods to the finance company. This provision entrenches the credit receiver’s rights under the Act and affords him maximum protection. All the interests paid on goods under a credit agreement over the 84 . Normally.

the landlord has a tacit hypothec over all movables on the leased premises (including goods subject to a credit agreement) for any amount of arrear rent and such hypothec accrues automatically as soon as the rent is in arrears (See notes on this subject in the Law of Lease). The seller as the owner can vindicate the goods from the 3rd party in possession of goods. .period agreed are payable to the finance company and not the seller.The rationale for such an arrangement is the buyer will not be able to pay cash for the goods bought. 1 1953 (2) SA 784. 85 . he commits theft. R v Mapanga1 held that if a buyer sells goods that are under a credit agreement without the seller’s consent. Sale of goods by the buyer. (See notes on vindication). Landlord’s Hypothec Where the buyer is a tenant in terms of a lease of immovable property. The seller also cannot wait for the payment of the last installment and the finance company is a profit making organization.

the seller’s and pledgor’s claims conflict. the lien and seller’s hypothec conflict. the seller acquires a hypothec over the subject matter of a credit agreement as security of money owed. In the event of the buyer’s insolvency. 86 . in circumstances which indicate the intention to alienate them. However. liens will be given first preference. The seller has the right to vindicate the goods if the buyer sells them. commits theft. Pledgee – a buyer who pledges goods which are under a credit agreement during the subsistence of the agreement. In cases of insolvency. Section 84(1) of the Insolvency Act requires the buyer’s trustee to deliver the goods to the seller on request by the seller. The remaining creditors will have recourse to the residue in the buyer’s estate.. Lien holders – these are people who are entitled to retain the possession of goods of others as security for repayment of incurred expenses for improving the property of another. many a time the seller’s hypothec is preferrent. However.Creditor’s claims on the buyer’s insolvency Upon the buyer’s insolvency. Leans also attach to goods which are subject to a credit agreement.

1 Chapter 24.07 in Zimbabwe.CHAPTER 6 THE LAW OF INSURANCE It is largely governed by the Insurance Act1.. 87 .

Professor Christie convincingly contends that in practice. Formation of an insurance contract. associations of underwriters such as Lloyd’s. 88 . Parties to the insurance contract. The insurer – his/her main responsibility is to compensate the insured in the event of occurrence of loss. The main object of insurance is to protect people from financial disaster. The person who compensates for loss insured is usually referred to as the insurer whilst the person who pays premiums as called the insured. mutual insurance societies and associations of underwriters. Such protection is brought by the payment of a moderate price in exchange for a promise to pay an agreed amount if or when the disaster or loss occurs. mutual insurance societies or more rarely.Insurance is defined as the pooling of risk. the individual insurer is almost non-existent and insurers are either insurance companies. insurance companies. They come in the form of individuals. This agreement is usually reduced into writing and is referred to as the insurance policy. The Insured – his/her main responsibility is to pay a moderate price in exchange of compensation if loss insured against ensues.

the insurer should answer all questions truthfully and honestly. When the insured fills the proposal form. In Dickson and Company v Devitt2. It is common practice insurers require the insured to fill in standard form proposal forms containing a number of questions. the court held that the insured is under no obligation to read the policy.Given that the insurer usually comes in the form of Insurance Companies or mutual insurance societies. It is only when the insurer is satisfied and accepts these proposals that an insurance policy comes into being. He also owes the insured the duty of care and skill. 89 . it becomes common cause that they act through their agents (called the insurance broker). Because insurance contracts are based on trust and require utmost good faith (uberrimna fides). on the answer to which the insurer will decide whether to issue a policy or not and the terms to be included therein. Section 35 of the Insurance Act provides that an insurance broker must be registered. The insured thus becomes the offeror whilst 2 (1916) 86 LJKB 315. (S) he owes his principal a duty to obtain a policy according to his instructions. but is entitled to rely on the skill and efficiency of the broker. he does so as a proposer of an insurance contract.

The issuing of an insurance policy is usually an acceptance by the insurer of the offer contained in the proposal form. CORE PRINCIPLES OF INSURANCE. Provides that an insured cannot insure against something that (s) he has no interest in.the insurer becomes the offeree. The invocation of this doctrine dates back to the early 17th Century England where gamblers were allowed to take out insurance policies in favour of the property they used in gambling or the lives of people they gambled with. lose his property tomorrow in bait and then claim compensation the next day. someone would ensure the life of the person he gambled with today. kill him tomorrow and the claim compensation the next day. Upon final consideration of the proposal form. This was because the people concerned had no interest in the subject matter of the insurance contract. Here. 90 . What would normally happen was that someone would take out an insurance policy today. INSURABLE INTEREST. The insurer usually gives a temporary cover note in lieu of the insurance policy. Conversely. the insured can deposit an amount as an installment known as a premium. an insurance policy will be issued containing the terms of the insurance contract.

The shop in question was destroyed by fire and the husband claimed compensation. a husband insured his wife’s shop and stock from fire. This interest is deemed present where the insured stands to lose out if the subject matter of the insurance perishes as a result of the risk insured against happening or if (s) he benefits from the non-occurrence of risk. The court rejected this argument and held that the husband actually had insurable interest in both the shop and stock. In the English case of Little John v Norwich Union Fire Insurance. since he would incur loss in the event of the risk insured 91 .This caused a lot of hardships to insurance companies. Where the insurable interest did exist. no greater sum than the actual value of the property could be recovered. to overcome this problem the English legislators promulgated the Insurance Act of 1745 and the Life Assurance Act of 1774 which provides that the insured should have interest in the subject matter of the insurance contract. However. The insurance company refused to compensate arguing that the husband had no insurable interest in the property of the wife because he did not own it. The wife was the owner of the shop whilst the husband was responsible for the management.

against occurring. The court held that the husband actually had insurable interest as he was the one who would be obliged to replace the ring and also the husband could actually sell the ring in the event of financial hardships in the family. is 92 . it is discernible that insurable interest exists where: The insured stands to lose if the subject matter of the insurance perishes as a result of the risk insured against occurring or If the insured benefits from the non-occurrence of risk or Both. a husband insured his wife’s wedding ring against theft or any other form of loss. He also stood to benefit in the continued existence of the subject matter of the insurance. The issue of insurable interest arose in litigation. DOCTRINE OF SUBROGATION. after compensating or indemnifying the insured. in the English case of Phillips v General Accident Insurance Company. From the above cases. Similarly. It is similar to the Roman-Dutch concept of Cession. It provides that an insurance company. The ring was subsequently lost and the husband claimed compensation.

The insurance company objected to this and made a legal claim for subrogation of the purchase price. the insurance company is entitled to any benefit given to the insured by the 3rd party with the object of minimizing his loss. destroyed the house in question and the insurance company indemnified the seller for the loss. A fire subsequently broke out. In the English case of Castellain v Preston.entitled to step into the shoes of the insured and claim against the party or person who caused the loss as if the company was the insured himself. there was a sale agreement involving a house. THE DOCTRINE OF DISCLOSURE Provides that there is a duty on both the insured and the insurer to disclose to each other all facts material to the contract or which are material to the risk (periculum) or the assessment of the premium. Here. The court upheld the claim holding that the insurance company was indeed entitled to the full purchase price because it had already indemnified the seller. The rationale for this is to prevent the insured from double satisfaction or unjust enrichment. 93 . The seller then insured the said house against fire. The house was subsequently sold and the seller got the full purchase price from the buyer.

However. A fact is deemed material to the insurance policy if it can guide a reasonable and prudent insurer in the assessment of the risk or calculation of the premium. However. This includes the ship itself. The risk insured against must always be specified in the insurance contract and insurable interest must be present. freight or goods. Here. 94 .e. this doctrine is not strictly applied in South Africa. Fire Insurance – is often combined with other policies for the protection of property. where one party misrepresents. the insured’s duty of utmost good faith requires him to take reasonable steps to put it out.This arises from the English law’s principle of uberimna fidei or fides (utmost good faith). was the misrepresentation a material breach of the insurance contract. the case of City Taylors v Evans3 held that he would not be compensated because his failure has become the 3 (1929) 91 LJKB 379 @ 385. the insurer insures his property from fire. when a fire breaks out. If he fails to do this. For instance. TYPES OF INSURANCE Marine Insurance – covers risks which might occur when goods are transported using sea transport. the court will determine whether the misrepresentation affected the calculation of risk i.

This policy covers theft and damage of the car as well as liability to certain occupants or 3rd parties in respect to injuries or death (and their dependants). Life and Accident Assurance – usually comes in the form of funeral policies wherein the insurer undertakes to take care of funeral expenses in the event of the insured’s death as a result of either an accident or anything specified in the insurance contract. Types of Insurance Agents. Motor Vehicle Insurance – section 22 of the Zimbabwean Road Traffic Act makes it an offence to use a motor vehicle or trailor on a road unless covered by a statutory policy. If he completes the proposal form then he is transformed into the agent of the insured and his knowledge will be imputed onto the 95 . He cannot bind the insurer through his transactions. The scope of cover depends on the terms of the contract. He has no authority to conclude the insurance policy or contract.proximate cause of the loss. This means that motor vehicle or trailor owners should take out insurance policies to cover risk caused by or arising from the use of the motor vehicle or trailor concerned on the road. Canvassing agent – only solicits for proposals.

Termination of Insurance Same as an ordinary contract. The canvassing agent’s knowledge cannot be imputed to the insurer unless written down. the insured has to notify the insurer of the loss within a reasonable period of time. However. Consequences of the Insurance Contract. However. He is the agent of the insured and is liable for his negligence. The Insurance Broker – an independent agent who deals with insurers or insurance of his own choice. Once an insurance contract is concluded. 96 .insured. the insured is obliged to pay premiums and the insurer is mandated to compensate the insured when loss occurs. it suffices to say that an insurance contract can also be terminated if the insurable interest in the subject matter of the contract ceases.

However. It is a topic that has been clouded with a myriad of mysteries since it is somewhat technical. the court held that negotiable instruments are notoriously difficult. a negotiable instrument was defined as “an instrument which defies a precise definition. In Ballows Motors Investments v Smart1.CHAPTER 7 NEGOTIABLE INSTRUMENTS They are governed by the Bills of Exchange Act. Even courts have accepted this conception.. 1 2 1993 (1) SA 347 @ 352 F-G 1984 (2) SA 393 97 . mysterious as the topic appears to be we will try as much as intellect permit us to demystify the topic. What is a negotiable instrument? In Impala Plastics v Coetier2.

Historically. a negotiable instrument is a document of title to money. It was found safer and convenient to devise instruments which would give the bearer thereof the right to transfer – as nearly as possible – with the necessary ease and safety with which a cash payment is made but without the inconvenience of carrying large sums. The characteristics of a promissory note are as follows: .” An example of a promissory note is the monetary notes which we use in our day to day lives. Types of Negotiable Instruments.It is an unconditional promise .Generally. Promissory Note – section 89 (1) of the Zimbabwean Bills of Exchange Act as well as section 87 (1) of the South African said Act define a promissory note as “an unconditional promise in writing made by one person to another signed by the maker and engaging to pay on demand or at a determined future time a sum certain in money to a specified person or his order or bearer.In writing . negotiable instruments are a creation of law merchants due to a difficulty in handling large sums of coins.Signed by the maker .It should have an intention to pay money on 98 .

It should be signed by the drawer. a bill of exchange has 3 parties. **However.demand. . . Cheque – is a bill of exchange drawn on a banker 99 . it is pertinent to note that unlike a promissory note which has 2 parties. requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to the order of a specified person or to bearer.addressed by one person to another (a third party) requiring him to pay the payee on demand or at a determinable future time.It should be payable to a specified person or bearer Bill of Exchange – is define by section 3 of the Zimbabwean Bills of Exchange Act as we as section 2(1) of the same Act in South Africa as “an unconditional order in writing addressed by one person to another signed by the person giving it.” An example is a cheque and the following characteristics are discernible: .in writing .it is an unconditional order .

The essential characteristics of negotiability can be summed up as follows: *The instrument and the rights evidenced by it – a negotiable instrument may be transferred by either delivery or by endorsement and delivery. Payee – the beneficiary of the cheque. Also. an ordinary bill of exchange is payable either on demand or at a determinable future time whilst a cheque is only payable on demand.and payable on demand [section 72 and section 2(1) of the Zimbabwean and South African Bills of Exchange Act respectively. Such a transferee obtains a good and complete title to the instrument 100 . Parties to a cheque Drawer – this refers to a person who draws up or addresses a cheque. **It is important to note that ordinary bills of exchange are drawn on any 3rd party whilst a cheque is drawn on a banker only. *A bona fide transferee for value of a negotiable instrument may acquire a better title than the predecessor in title notwithstanding that the predecessor had a defective title. The Negotiation of a Negotiable Instrument. Drawee – the bank.

such title does not just come about. The following preset requirements must be satisfied: (1) the bill must be regular on the face of it. On the other hand.and is referred to as a holder in due course. He is referred to as a holder in due course. Ie he obtains unassailable rights or he gets a complete tiltle to the bill. The holder of such a bill gets an assailable or undisputable title to the bill. Lord Denning in Arab Bank Ltd v Ross held that “Regularity is different from validity…on the 101 . This means that the defences that would have been raised against his predecessors in title cannot be raised against him. However. However. it is important to note that transferability of a bill bespeak the conveyance of a bill from one person to another with or without defects or equities. negotiability refers to the transfer of a bill without defects or equities. A bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee a holder in due course. Holder in Due course Section 28 and section 27 of the Zimbabwean and South African Bills of Exchange Act respectively provides that a holder in due course is a person who take a bill free from equities or defences.

it is discernible that what is relevant in this particular case is not whether the person who took the instrument ought reasonable to have suspected a defect in the title but rather the suspicion must have arisen in the light of the reasonable knowledge which he actually possessed. that is enough to prevent him from taking it in good faith. from this quotation. .other hand an endorsement which is quite invalid may be regular on the face of it.(3) The holder must take the bill in good faith and for value. (4) The holder must not have had notice of any defect in the title of the person who negotiated the 3 (1876-77) 2 App Cas 616 102 . he is entitled to be treated as having acted in bad faith…” **However. Lord Blackburn in Jones v Gordon3 held that “(a) if a man suspects that something is wrong with a negotiable instrument.(2) The holder must have no knowledge that the bill was once dishonoured. The bill is then regular on the face of it…” . Thus the endorsement may be forged or unauthorized and therefore invalid…but nevertheless there may be nothing about it to give rise to any suspicion. The suspicion need not be accurate provided it is near the truth and (b)if a man admits that he was careless in not discovering a defect in the title of the bill.

But in Zimbabwe. a fictitious person is not the same as a non-existent person. No endorsement or signature is needed inorder to transfer such an instrument. This means that whoever is in possession of such an instrument is entitled to benefit from the proceeds thereof.” The legal significance of a bearer instrument is that the document and the rights evidenced by it can be transferred by simple delivery. just like in England. A fictitious person in this context is one where the drawer never intended to make payment to the payee written on the instrument but only inserted his name nominis 103 . Bill payable to bearer. The main problem with such instruments is that they are risky and not safe because whosoever is in possession of such cheques can present them over the counter for payment.bill to him. a fictitious person is the same as a non-existent person. It is usually expresses in the following terms “Pay bearer on demand. Bill payable to a fictitious person In South Africa. NB – A bill may be payable to either bearer or a specific person but not to both.

The legal significance of declaring the payee fictitious is that such an instrument is payable to bearer [section 6(3) of the Zimbabwean Bills of Exchange Act] Instruments payable to a specific person or his order. then the payee is not fictitious. an endorsement is needed. Such instruments are payable to the person mentioned on the instrument as the beneficiary.umbra (as a way of pretence). An endorsement is a signature that is placed on a cheque solidifying the mandate given by the endorser. 104 . The common phrase for such an instrument is “Pay Innocent or order. Did he intend to make payment to the said payee or did he just insert the name as a way of pretence? If it was the former. But if it is tha latter. 4 see The Governor and Company of the Bank of England v Vagliano Brothers 1891 AC 107 (HL).e the courts have to look at the state of mind of the drawer when he made the cheque. I. then the payee is fictitious4.” This means that such a bill is payable to Innocent or whosoever Innocent orders the Bank to pay. For such an instrument to be transferred.

105 . It is payable to such a person or his order. For example.(2)Special endorsement – it specifies the person to whom the bill is payable. It comes in phrases like “Pay Innocent only. This means that the new beneficiary of such a cheque will be Moses Matimba. The instrument with such an endorsement is payable to bearer. Moses can transfer the same cheque to another person in a similar manner and the chain can go on and on like that. Innocent can write at the back of a cheque “Pay Moses Matimba” and the put his signature on a cheque to which he is the beneficiary. He is not permitted at law to transfer such an instrument to any other person.” This means that Innocent is the only beneficiary of the bill. ***NB – The payee can transfer a cheque to a 3rd party by simply writing the name of such person at the back of the cheque and putting the payee’s signature. .There are 3 common types of endorsements namely: (1) Endorsement in blank – this does not specify the endorsee. What will validate the transfers is the signature of the existent beneficiary of the cheque. (3)Restrictive endorsement – it prohibits further negotiation of a bill.

Here. the payee’s right to recover is twofold: *He can seek recovery from the banker because the bank acted without authority or *He can sue the person who benefited from the fraud or forgery under the unjust enrichment action. section 23 of the Bills of Exchange Act provides that the bank should not honour the cheque since the mandate will be invalid. He later closed this account and opened another one in his own name. However.It sometimes happens that unscrupulous persons can forge the payee’s signature. However. Legally. the wife drew up cheques by forging her husband’s signature for about 8 months. With time the 4 5 see Leites v Contemporary Refregeration (pvt) ltd 1968 (1) SA 58 (AD). the payee’s right is subject to the following duties of the customer under common law: (1) Duty to notify the bank of all known forgeries Greenwood v Martins Bank 5 Facts – a husband operated a joint account with his wife. The husband realized it but he did not notify the bank because he feared that his wife would commit suicide. In such circumstances. no rights can flow from such an instrument unless if the principle of estoppel is invoked4. 1933 AC 51 106 .

The customer should exercise reasonable care whenever he draws a cheque to avoid the possibility of a 3rd party tempering with it in such a way as to mislead the banker as to the customer’s instructions.wife committed suicide and the husband claimed the amount paid under the forged cheques from the bank. [See London Joint Stock Bank Ltd v Mc Millan and others]6. When a person signs a cheque in a representative capacity. (2) Duty to draw cheques in such a way as not to facilitate fraud. Held – the husband had no claim since he was in breach of the customer’s duty under common law to notify the bank of all known forgeries. such information should be indicated on the said cheque. Crossings are used as safety devices which prevent cheques from falling into wrong hands. 107 . Crossings on a cheque These are two parallel traverse lines that are normally placed across the face of the cheque. They can be positioned anywhere and they need not cover the width of the instrument. By crossing a 6 (1898) AC 777.

This means that the payee cannot be paid anywhere else but the branch and bank specified on the cheque. What this means is that if the payee cashes the cheque on any other Barclays Bank branch which 108 . (1)General crossing – section 82(1) and 75(1) of the Zimbabwean and South African Bills of Exchange Act provides that a cheque is crossed generally if it bears across its face 2 traverse lines with or without the words ‘and Company.’ Where a cheque is crossed generally. For instance a cheque can indicate that it is payable at Barclays Bank Nelson Mandela Branch. The net effect of crossing a cheque is to restrict the transferability or negotiability of the cheque.cheque. (2) Special crossing – section 79(2) and 75(2) of the Zimbabwean and South African Bills of Exchange Act provides that a cheque is crossed specially if it bears across its face the name and branch of the bank which should pay the payee. the drawer instructs the bank to make payment to a specific payee using specific methods. Types of crossings. Ie it cannot be cashed over the counter but will be debited into the payee’s account. the banker on whom it is drawn shall not pay it otherwise than to the banker himself.

A combination of these is honestly paradoxical. the Bill of Exchange Act does not say 109 . This appears to be a paradox because “not negotiable” renders a bill transferable with defects whist a restrictive endorsement renders a bill not not Nelson Mandela. This means that such a bill ceases to be negotiable since transferrability is a sine qua non of negotiability. **There are times when some words are added to the crossings namely: *“Not Transferrable” – section 7(1) and 6(3) of the Zimbabwean and South African Bills of Exchange Act provides that such a bill cannot be transferred at all. the payee gets the bill with its defects or equities. However. *“Not Negotiable Account Payee Only” – this is a combination of not negotiable and a restrictive endorsement. it will not be honoured. In other words. *“Not Negotiable” – section 84 and 80 of the Zimbabwean and South African Bills of Exchange Act provides that the holder of such a bill cannot acquire or give a better title to such a bill than his predecessors in title. He cannot enjoy the benefits of a holder in due course.

the banking practise would not have bothered to invent the term “not negotiable account payee only. Resort should thus be had to case law. In the South African case of Standard Bank South Africa v Sham Magazine7 and the Zimbabwean case of Philsam v Beverley Building Society8. they operate as some safeguards if the cheque falls into wrong hands.anything about such bills.” They would have used the restrictive 7 8 1977 (1) SA 484 1972 (2)SA 546 9 1972 (2) SA 703 10 1985 (1) ZLR 385 110 . the nature of safeguards is not very clear since they were not explicitly stated in these cases. It appears as if the Sham and Philsam decisions supra (which are the most recent and binding according to the principle of stare decisis) favour the not negotiable interpretation whilst the Rhostar and Pyramid decisions favour the restrictive endorsement interpretation. On the other hand. the South African case of Rhostar v Netherlands Bank9 and the Zimbabwean case of Zimbank v Pyramid10 held that the effect of these words is to render a bill not transferable. If the interpretation was that simple. It is submitted that both decisions are wrong. However. Rather. the court held that these words do not render a cheque not transferable.

misrepresentation. Defences They are classified into absolute and relative defences. These include mistake. Absolute defences – these are the only defences that can be raised against a holder in due course namely: Forgery Fraud Lack of contractual capacity Material alteration to the instrument.endorsement and “not negotiable. undue influence. Relative defences – can be raised against a holder generally. The signatory of an aval is a surety guaranteeing payment of the 111 . drawer or endorser. That failing. whether from the maker. it is wise to eliminate such problematic phrases in our law of negotiable instruments. unless it is ‘backed’ by someone else of good credit.” It is therefore suggested that a compromise should be struck between these interpretations to come up with a solution. illegality etc The contract of aval – occurs when a creditor is not prepared to take a negotiable instrument.

112 .instrument and the benefit of this guarantee passes with the instrument to successive holders. The essential difference between a signer of aid and an accommodation party is that the former is not a party to the instrument whereas the latter is. ie. He signs without receiving value thereof but for the purpose of lending his name to some other person. (3) A referee in case of need . maker. as drawe. Other parties to a negotiable instrument (1) An Accommodation party . (2) A Signer of aid . (4) An acceptor for honour or payee for honour . or endoser.a security on a bill or note who signs the instrument but not as a party ie. maker. drawer. acceptor or a security who signs a bill or note as a party to it.he is a person whose name may be inserted into the bill by the drawer or an endorser so that a holder may resort to him in case of a person who is not liable on a bill who intervenes when a bill is protested for dishonour by non-acceptance or by non-payment and he himself accepts or pays the bill for the honour of any person liable thereon. He is a good samaritan who intervenes when things go wrong.

A partnership is a legal relationship between 2 to 20 people who contribute something into the 113 .- CHAPTER 8 LAW OF PARTNERSHIP.

partnership business with the object of making profit and sharing the profits or losses amongst themselves. Essential elements of a valid partnership Were summarized in the case of Joubert v Tarry as follows: - The agreement must be a result of a legal relationship – just like any other business venture. - The partnership must be a result of an agreement which may either be express or implied. Both in Zimbabwe and South Africa, the partnership agreement neeed not be reduced into writing. However, if it is in writing it is reduced into a partnership deed which is taken as evidence for the agreement by the parties. It is also important to note that a partnership can also be created by conduct. In the case of Fink v Fink, the following ensued: Facts – a husband and his wife were married out of community of property. They then started a daily and dairy product company. The wife was doing most of the management as the husband was fully employed somewhere else. They never shared the profits. Rather they ploughed the profits back into the business to improve and enlarge it. From a very humble beginning, their business flourished but

their love went the opposite direction. On divorce, the wife demanded the dissolution of the business as a partnership. Held – that although there was no partnership deed, the conduct of both parties satisfied the requirement for validity of a partnership. The conduct of the wife was more than wifely contribution or assistance. A partnership had been created by conduct. - The parties must contribute something to the partnership business. The nature of the contribution is unlimited. It may either be in terms of money or labour or skill or marketing prowess or both. The contribution must be to a joint occupation or towards some common interest. However, this should be distinguished from co-ownership in that co-ownership (unlike a partnership) does not have as its primary aim the making of profit. - The parties must have an intention to make profit out of their endeavour. This is the primary purpose of forming a partnership. Where the noble intention of making a profit is lacking or the prospect of making a profit ceases to exist, then the partnership will be dissolved. - The parties must have an intention to share profits and losses. Usually partners agree on a profit sharing ratio. Where this is absent, profits and

losses will be shared according to each partner’s contribution.

Types of partnerships. *Partnership en commandite – this is when partners make an undertaking that in the event of dissolution of the partnership, each one of them will make an agreed contribution in settling the partnership’s debts. This is akin to a company limited by guarantee. *Sleeping partner – this is one who does not participate in the day to day running of the partnership but simply contributes to the capital of the partnership business. He is liable to the extent of his contribution or according to the loss sharing ratios. Internal relations Partners are viewed as agents of the partnership business. This means that they owe each other a duty of care which is imputable on every agent. As regards management, unless there is an agreement to the contrary – every partner has the right to manage the partnership. They should try as far as reasonably possible to further the best

*Insolvency – unlike a company with limited liability.interests of the partnership. He is entitled by virtue of his being a partner. Each partner has the right to enter into binding contractual relations on behalf of the partnership. *On application by one or more of the partners – here the partnership can only be dissolved when 117 . Dissolution of a partnership The grounds for termination of a partnership are as follows: *Lapse of time. the personal assets of the partnership will be attached if the partnership property does not adequately pay the partnership’s debts during insolvency. Where a partner commits a delict or crime only in the furtherance of the partnership business. He does not need a special power of attorney to do this. *Mutual agreement *Change of membership – this is because a partnership does not have perpetual succession. Neither should they make secret profits. then the partnership will be bound. External relations. Their interests should not conflict with those of the partnership.

deadlock. employers’ organizations and the state. incapacity to perform duties. loss of mutual confidence. (b) the employers and trade unions and (c) trade union federations.the court is satisfied that there are just and reasonable grounds for dissolution. misappropriation of funds. Labour law can be divided into two namely: (1) Individual labour law – consists of those legal rules which govern the relationship between the 118 . serious violation of common law duties. frustration of business etc. In its broadest sense. CHAPTER 9 LABOUR LAW Deals with how work is supposed to be organized in society and is governed by the Labour Relations Act both in Zimbabwe and South Africa. labour law consists of those legal rules that govern the relationship between (a) the employer and the employee. For instance. lack of mutual trust.

There were 3 types of locatio conduction namely: (a) Locatio conductio rei – hiring of specified items. THE EMPLOYMENT CONTRACT An employment contract is an agreement between 2 legal personae (or parties) in terms of which one of the parties (the employee) undertakes to place his services at the disposal of another party (the employer) for an indefinite or determined period of time in return for a wage. The relationship between the state and trade unions and employers. ***It is pertinent to note that individual labour law is largely governed by the employment contract and common law whilst collective labour law is largely governed by statute. (b) Locatio conduction operis – hiring of services 119 . Developed from the Roman law contract of letting and hiring of services (locatio conduction). (2) Collective labour law – embraces the law relating key group players in the labour market namely: the relations between organized workers and either the individual employer or organized employers.individual employer and individual employee.

For example. the position of the employee should be within the organizational structure of the employer’s business premises whilst that of the independent contractor is not. (c) Locatio conduction operarum – the hiring of services by an employee. a fixed lunch and tea time etc (2) The organization test – an employee’s work is an integral part of the of the employer’s organization whilst an independent contractor’s work is not. Courts have devised 3 tests namely: (1) The control test – an employee works under the control and supervision of the employer whilst an independent contractor does not. The question which inevitably arises is how one should determine whether a person is an employee or an independent an independent contractor.2 (3) Multiple or dominant impression test – the court realized the limitation of the control and organization test and formulated the dominant impression test. whether the purported worker is entitle to pension. the Labour Relation Act does not apply to independent contractors and the NSSA scheme only applies to employees. other benefits. etc) and then come up 1 2 see Colonial Mutual Life Society v McDonald 1931 AD 412 see Smit v Workers Compensation Commission 1979 (1) SA 51 120 . having fixed hours of work. Such control involves the employee 1 reporting directly to the employer or his representative. Thus a distinction should always be drawn between an employee and independent contractor because different results flow from these relationships. Also. leave. Here. the courts will look at many factor (including the control and organization test. The 3rd category constitutes the modern day basis of the employment contract.

The only general exception to this is where the employee’s remuneration depends on the performance of work such as remuneration based on commission or where the provision of work is necessary to maintain the employee’s skills/ reputation. 4 3 121 . the employer is obliged to provide safe working conditions by taking reasonable steps to ensure the safety of the employees. Generally there are 3 if not 4 types of leave namely: . But section 14 of the Zimbabwean Labour Relations Act provides for paid sick leave. see Southampton Assurance v Mutuma see Muzondo v University of Zimbabwe 1981 ZLR 333. Under common law. it is said that every employment contract has an implied duty of cooperation. an employee who is disobedient may be summarily dismissed7. It requires the employee “to use his best efforts to ensure the efficient running of the employer’s enterprise. However. 8 (c) To provide safe working conditions – under common law. . 5 see Wallace v Rand Daily Mail 1917 AD 479 @ 482. For workers with a 5 day week. (b) To be competent – the employee impliedly undertakes to be reasonably competent or to exercise the normal skill and diligents in the performance of his work.Sick leave – was not present under common law. (d) To provide leave – under common law. Common law allows employers to summarily dismiss the employee for incompetence5. Conversely. But it is mostly provided for in Collective Bargaining agreements. He should not make secret profits and should not work for is employer’s rival6 (that is why some employment contracts have restraint of trade clauses). this duty does not entail that the employee renders services but that he should only be available to render services. DUTIES OF THE EMPLOYEE (a) To make services available to the employer – the employee must place his services at the disposal of the employer. 6 see Mine workers union v Brodrick 1948 (4) SA 959 7 Under SI 371/85 the duty has been slightly modified to read “willful disobedience to a lawful order. (b) Payment of remuneration – this is based on the common law principle of “no work no pay. the employer is not obliged to provide work for the employee4.” 8 see Zimbabwe Sun Hotels v Lawn 1988 (1) ZLR 143. the employer does not have a duty to provide work to the employee. (c) To act in good faith – the employee is obliged to serve the employer honestly and faithfully. The duty to provide leave arises out of either statute or the employment contract.Annual or vacation leave – the Zimbabwean Labour Relations Act is silent about this leave.” DUTIES OF THE EMPLOYER (a) To receive the employee into service – as already mentioned. (d) To be obedient – the employee should obey the lawful orders of the employer.” It is in the interests of justice fairness and equity to pay a person who has worked for you. (e) Duty of cooperation – under English law. the employer is not obliged to provide leave to the employee.with a conclusion as to whether such a worker can be called an employee or independent contractor3.

(f) To observe the statutory rights of the employee – these include: .The right to join a trade union . sex.Right to democracy in the workplace etc VICARIOUS LIABILITY Stipulates that an employer is jointly and severally liable for all the delict committed by his employee in the course and within the scope of his employment. . Mc Nally in Swaibo v National Railways of Zimbabwe (Sc 54/95) held that compassionate leave is “a privilege of the employee alone” and should not always be given. when the servant acts in breach of a prohibition given by the employer. the question that the court asks itself is whether the prohibition limits the sphere of the 8 9 see Langley Fox Building Partnership (pty) Ltd v De Valance 1991 (1) SA 1 (A). the employer will not be liable9. The only time where an employer can be vicariously liable for a delict committed by an independent contractor is when he tasks the contractor to carry out work which is inherently dangerous8. etc .22 days are given as sick leave and 26 days are given to employees with a 6 day week. 122 . however. place of origin. Three things should be established for an employer to be vicariously liable namely: (1) There should be an employer-employee relationship – this means that an employer of an independent contractor cannot be held vicariously liable in any circumstances. (3) The delict must have been committed within the scope and in the course of the employee’s employment.Not to be discriminated against on the grounds of race. (2) The employee must actually be liable for the delict. It is also a privilege. The courts have devised the degree of deviation test to determine this.Maternity leave – absent in common law but section 18 of the Zimbabwean Labour Relations Act provides for maternity leave. (e) To respect the employee – the employer should treat the employee with due respect as a human being. can it be said that the employee was still acting within the parameters of his work or he had abandoned his work completely. tribe. see Roos v De Loor’s Ltd 1931 TPD 100 @ 104.Right to strike . Women should be given 75% pay when they are on maternity leave and she should take it once every 24 months – with a total of 3 times with respect to her total service to any one employer. This means that if the employee acts outside his employment. Compassionate leave – it is usually given when a close relative of the employee dies. It is obviously nonsensical to hold an employer accountable for a wrong which his employee did not commit. .Paternity leave – is usually given to newly weds.Right to fair labour standards .To be a member of a workers committee . The question the the court asks is “in terms of distance and time.

then the employer will be vicariously liable.Expiry of time – this is only possible if the contract has a time stipulation clause. TERMINATION OF THE EMPLOYMENT CONTRACT Can be subdivided into 2 namely: Termination under common law Termination under statute Termination under common law. If it is the former. then the employer will not be liable10.” Rationale for vicarious liability. But if it is the latter. 10 11 see Est Van Der Byl v Swanepoel 1927 AD 141. The following ways exist: . If this is the case the master is not liable…Ultimately the question resolves itself into one of degree and in each particular case a matter of degree will determine whether the servant can be said to have ceased to exercise the functions to which he was appointed. *Interest or profit theory – the employer usually benefits from the work of the employee and should take it upon himself to incur the loss caused by him. *Solvency theory – usually. the employer is in a better position to compensate the injured party than the employee. as against injured 3rd parties.By mutual agreement. Where a driver deviates from his route and goes on the frolic of his own. be liable for harm which he caused to 3rd parties… If he does not abandon his master’s work entirely but continues partly to do it and at the same time to devote his attention to his own affairs. Feldman v Mall11 convincingly held thus: “(a) If he abandons his master’s work entirely inorder to devote his time to his own affairs then the master may or ma not. Vicarious liability is justified on the following grounds: *Identification theory – an employer does his work through the hands of the employee and should be responsible for the wrongs committed by him.employee’s employment or simply regulates the conduct of the employee within the sphere of his employment. This reason favours the no-fault system which tries to ensue – as much as reasonably practicable – that injured parties are compensated. *Danger or risk theory – the work entrusted to the employee creates certain risks of harm (the commission of delicts) for which the employer should be held liable on the grounds of fairness and justice. 1945 AD 733 @ 742 &756 123 . The employer can easily absorb losses either by taking out insurance policies or raising prices if there are no price controls. then the master is legally responsible for harm caused to 3rd parties…the test to be applied is whether the circumstances of a particular case show that the servant’s digression is so great in respect to space and time that it cannot reasonably be held that he is still exercising the functions to which he was appointed. This is called the risk of business. according to the circumstances. .

competing with him or assisting a competitor. The employer who wishes to retrench must give written notice of the intention to retrench to the Works Council or Employment Council (if there is no works council).The insolvency of the employer entitles the employee to cancel the contract and claim for damages. or making secret profits etc. If it fails. . MISCELLANEOUS (South Africa) 12 see Section 3 of the Labour Relations Act section 2 of the Retrenchment Regulations (SI 404/90) as read with section 2b of the Amendment of the said Regulations (SI 252/92). he will then send his written consent.”13 Here.Summary dismissal – an employee can be dismissed without notice: *for incompetence or negligence of a serious nature *for marked or deliberate absenteeism or failure to work *on account of unreasonable absence due to illness. On receipt of the notice. Termination falls in 3 categories namely: (a) Termination under SI 371/85 – this applies to employees who are not public servants12.Completion of a specified task. 13 124 . The notice should cite reasons for the retrenchment and the names of the employees to be retrenched. (c) Retrenchment – is the termination of employment “for purposes of reducing expenditure or costs. for example. employees lose their jobs without fault imputable on their part. or closing down or reorganizing an undertaking or for similar reasons. then the employer can retrench and pay the employees concerned what is referred to as a severance package. . section 2A of the Labour Relations (Termination of Employment) (Conditions of Service) Regulations SI371/85 provides that the regulations will not apply. citing reasons for the dismissal. the authority concerned should try to secure an agreement between the employer and employees concerned. or adapting to technological change. it will refer the matter to the Retrenchment Committee which will then make recommendations to the minister of Labour on whether or not retrenchment is feasible. An application should be made to a Labour Relations Officer for permission to dismiss. Thus the Code concerned will govern termination. *Willful disobedience to a lawful order falling within the scope of his appointed duties *Insubordination and other behaviour subversive to discipline *Dishonesty *Gross misconduct *Commercial infidelity to his employer. If the Officer concerned is satisfied. Here particular focus will be had to Zimbabwean legislation.. revealing trade secrets.Supervening impossibility .Termination on notice . Termination under statute. (b) Termination under codes of conduct – whenever there is a registered code of conduct. Once the minister approves of the retrenchment.

The dismissal of employees for operational reasons .Criteria for merit increases or payment of discretionary bonuses . requires employers to deduct from the wage of their employees. through conciliation. A workplace forum has 2 general functions namely: . irrespective of whether they are members of the trade union and .Production development and export promotion NB – The term ‘consult’ imply that employers must listen to the members of the forum and note their views. (3) Labour Court – consists of a Judge President. a trade union should have a name and constitution before registration. However. Their main responsibility is to represent employees.Mergers or transfers of ownership of the company .Restructuring the workplace . a contribution according to seek to enhance efficiency in the workplace **The employer should consult it for the following matters: . (2) Arbitration –it also involves a 3rd party.Partial or total plant closures . which together with the employer’s own similar contribution is remitted to the unemployment insurance fund.Job grading .Education and training . **Employees have the following duties under the same Act: to take reasonable care of his own health and the health of other employees to report unsafe and unhealthy conditions. RESOLUTION OF DISPUTES (1) Commission of Conciliation – tries to resolve. Conciliation is a process in terms of which a 3rd party intervenes in a dispute to assist the disputing parties to reach a settlement. The amounts are held available for the employee to meet the contingencies of his unemployment. or severely reduced wage or loss of wage due to certain illnesses.Changes in the organization of work . Deputy Judge President and as many 125 . any dispute. (4) TRADE UNIONS They become body corporates with legal personality after registration. It imposes the following duties on the employer: Duty to provide and maintain a safe and healthy working environment To eliminate hazards and taking precaution measures concerning those hazards. The employer should also try to reach a consensus with the forum. earning not more than R26 000 per annum.(1) Unemployment Insurance Act 30 of 1966. promote the interests of all employees in the workplace.Exemptions from any law or collective agreement . its main difference with conciliation is that the 3rd party can actually make a decision which binds the disputing parties. The commission should do this within 30 days failure of which will see the matter being referred to arbitration. (2) Occupational Health and Safety Act **Primarily aims to protect the safety and health of people at work but does not apply to the mining industry. (3) WORKPLACE FORUMS (they are akin to Workers Committees in Zimbabwe).

At least 3 elements of a strike emerge from this definition namely: .Judges as the president may consider necessary. It consists of the Judge President. for purposes of remedying a grievance or resolving a dispute in respect to any matter of mutual interest between the employer and the employees. Such securities are classified into 2 namely: (1) Real security – they stem from real rights which entail an interest that one has in a thing that is enforceable against the whole world. he usually needs some assurance for the repayment of the debt in question. CHAPTER 10 SECURITY Whenever a person lends another some money. The purpose must be to compel the employees to accept a demand. A personal right is an interest that a person has in a thing and is enforceable against an individual by virtue of a contract. the Deputy Judge President of the Labour Court and 3 Supreme Court judges.It should be either a complete or partial cessation or refusal of work . ##It is interesting to note that it makes no difference whether or not the employer breaches the employee’s employment contract. They can only refer a constitutional matter to the Constitutional Court.The aim must be to remedy a grievance or settle a dispute in any matter of ‘mutual interest. a lock-out is the exclusion by the employer of employees from the employer’s workplace for the purpose of compelling the employees to accept a demand in respect of any matter of mutual interest between the employer and employees. (5) STRIKES AND LOCKOUTS **A strike is a complete or partial concerted refusal of work by persons who have been engaged by the same employer or by different employers.’ **On the other hand. (2) Personal security – emanate from personal rights.’ . REAL SECURITY 126 . Such reassurance is what is regarded as security. (4) The Labour Appeal Court – is the final appeal court in respect to all judgements and all the orders made by the Labour Court.The action should be concerted – ‘concerted. It has powers to grant orders. At least 2 essential element arise namely: Exclusion – the employer must physically exclude (or lock out) the employees from the workplace.

Origins of a mortgage. *By judicial attachment – this usually occurs where property is attached in execution of a judgement. parties can now have a notarial bond which does not specify movables. If there is no principal or original obligation. A mortgage is simply an accessory to the principal obligation. It is very important because it is given preferential treatment in case of insolvency of the mortgagor. It involves a 2 pronged understanding namely: *Wide interpretation – refers to a right over the property of another to secure an obligation. then there can be no mortgage bond.The bond has to be registered for it to create a real right.There must be the principal obligation (usually in the form of a debt). *By operation of the law (either statute or common law). Similarly. It is called a tacit or legal mortgage. However. This type is passed simultaneously with the transfer of land. *Narrow interpretation – refers to security over immovable property. Essential elements of a mortgage .[1] MORTGAGE BOND – is a bond that is attested by the Registrar of Deeds especially hypothecating immovable property. if the principal obligation is not valid. *Special mortgages – they relate to particular or specified immovable property. the word mortgage encompasses both movable and immovable property ie it includes a pledge. It may be constituted for a part or the whole of the pretium. Parties to a mortgage bond Mortgagor – refers to the person who hypothecates his property in favour of someone (who is usually a creditor). An obligation here bespeaks a debt. Such a mortgage is known as a judicial mortgage. The bond is usually registered in favour of the person advancing the money. Here it excludes a pledge1. Mortgagee – refers to the person in whose favour the mortgage is created or constituted. general mortgage bonds have fallen into disuse. 1 see Section 2 of the Zimbabwean Deeds Registries Act. 127 . In this sense. This means that any defence that can be raised in relation to the principal obligation can also be raised in relation to the mortgage bond. . . In practice. Examples of special mortgages (a) Kustingbrief – is a mortgage intended to secure money for the purchase of land. then the mortgage bond will be invalid also. Types of mortgages *General mortgages – they do not specify the immovable property. Mortgage bonds can come into being in any of the following ways: *By agreement between the parties concerned – such mortgages are known as express mortgages.There must be immovable property to which the mortgage is attached.

Parties to a pledge are referred to as the pledgor and pledgee. *Debtor-creditor liens (or a lien ex contractu) – secures payment for money spent in relation to property in terms of a contract. They are classified into: *Salvage liens – for repairs undertaken on a property. Types of liens *Enrichment lien – is available to a person who has incurred monetary expense in relation to the property of another person and that other person had been enriched. It is important to note that a lien is only a defence to vindication. A lien differs from a tacit hypothec in that a lien exists only where the creditor is in possession of property. For a pledge to be valid.that excluded by statute . The lienholder is entitled to hold the property until the contract price has been paid. The pledge will cease to be valid if the pledgee loses possession of the pledged property. [2] PLEDGE It is governed by the same principles as mortgage except that the right is over movable property. 128 . there must be delivery of the movable property in question. It is personal in nature and is available only against the debtor or successors in title who had knowledge of the lien. A lien provides real security like a mortgage and pledge in that the lien holder is entitled to sale the property to recover the debt is the debtor defaults to pay. The law however. excludes certain property from being mortgaged namely: . It does not create a cause of action. The lien entitles the possessor to retain possession of property until he has been duly compensated. such land can be mortgaged where the interests of 3rd parties are not interfered with2.Res litigeosa – land subject to litigation. (c) Kinderbewijsen – is given by a surviving parent for the portion of inheritance retained by him or her belonging to the minor children. However. What property may be mortgaged? Common law says that property that is res in commercium. Where there is no delivery. then he losses the lien. it is possible to have a pledge constituted over movable property through a special notarial bond.(b) Covering bond – is intended to secure payment of future debts. The future debt may or may not stipulate the amount of debt covered by the bond. Where the debtor is not the owner of the property. This means that if the creditor losses possession.that which is extra res commercium . *Improvement liens – for useful improvements. the lien cannot be enforced against the 2 see Coronel v Gordon Estate 1902 TS 95 @ 101. [3] LIEN It is a right that is conferred by operation of law on a person who is in possession of the property of another person which he has expended money or labour.

It terminates upon payment of the rent due. Essential elements For a tacit hypothec to be existent. the landlord’s tacit hypothec will be terminated. This is granted to the lessor or landlord of immovable property over the movables (including money and the property belonging to 3rd parties) brought onto the leased premises to secure the payment of rent. The hypothec comes into existence the moment the lessee falls into arrears. the thing can be released from the lien. If he obtains possession then a new lien will be created.The landlord must be unaware of the true owner.If the debtor provides alternative adequate security for the payment of the debt.By attachment in execution on behalf of the lien holder.The property must have been brought to the premises with the knowledge and consent of the owner (express or implied) . the lien holder can apply for a spoliation order.If the lien holder loses possession of the thing.By renunciation by the holder where the holder renounces the lien as security. . However.owner except if he ratifies it. the landlord is entitled to claim delivery of those goods from the 3rd party. [4] TACIT HYPOTHEC Is created automatically over the property of another person as soon as that other person becomes indebted to the creditor.The property must be intended for use by the tenant. .Where the lien holder loses control as a result of fraud. .There must be an intention that the goods will remain on the premises for an indefinite period. duress or mistake. Can be terminated in any of the following ways: . PERSONAL SECURITY SURETYSHIP This is when a 3rd party (the surety) guarantees that if the debtor fails to pay back his debt. there were a myriad of tacit hypothecs which have now fallen into disuse except the landlord’s tacit hypothec. .” 129 . One can thus rely on an enrichment lien which can be enforced against any person. Termination or extinction (also applies mutatis mutandis to mortgages and pledge). . the following have to be present: . Manase and Madhuku3 define suretyship as “an accessory contract by which a person (known as the surety) undertakes to the creditor of another (the principal debtor) primarily that the principal debtor who remains bound 3 in their book “A Handbook on Banking Law In Zimbabwe.By destruction of the thing that is the object of the lien. .Upon payment of the principal debt. he will be obliged to pay the debt off. . . Under common law. If the 3rd party is mala fide. **If the property is removed from the premises and received by a bona fide 3rd party.

Same as contract. (c) Benefit of cession of action (beneficium cedendarum actionum) – entitles the surety who has paid the creditor to an automatic cession of the latter’s rights against a debtor. *Where the creditor’s conduct is taken to have discharged the surety from the contract.” The following legal principles are noteworthy: *A suretyship contract is an accessory contract – this means that it can only exist where there is a valid principal obligation. Termination. *General principles of an ordinary contract apply regarding vitiation. . each surety is obliged to pay the proportional share he owes guaranteed to pay the creditor. provided it is a defense arising on the obligation itself and not a personal privilege granted only to the debtor.will perform his obligation to the creditor and secondarily that if and so far as the principal debtor fails to do so he. the surety will still be bound. a suretyship contract should be reduced into writing. *The defenses that the debtor will be entitled to will be the same that the surety will also be entitled to. However. 130 . *The surety’s debt becomes enforceable as soon as the principal debtor is in default. OTHER DEFENCES *He may challenge the validity of the suretyship contract. *The contract can be set aside on the basis of being contrary to public policy. *The surety may claim to be wholly or partially discharged from liability by the creditor’s action or inaction. *Under South African and Zimbabwean law. the surety will perform it or pay the debt off. *Liability of a surety may be fixed or continuing. *A surety who has paid up has a right to recourse against the principal debtor and cosureties if he pays more than his proportionate share. *If the debtor becomes insolvent. it is pertinent to note that a suretyship contract usually terminates in 2 specific ways namely: *Where the principal debt has been extinguished. Defences or benefits of the surety (a) Benefit of excursion (beneficium ordinis seu excurssionis) – provides that the creditor must proceed first against the principal debtor before suing the surety. *The capacity to enter into a suretyship contract is not different from the contractual capacity in an ordinary contract. (b) Benefit of division (beneficium divisionis) – provides that where there are 2 or more sureties. *He may avail himself of any defence which is open to the principal debtor. the surety will continue to be bound. *If the creditor cedes his rights.

Copyright defined It is an original work or intellectual property that is afforded qualified monopoly in the 131 . The origins of the Act are provisions of the Berne Convention for the Protection of Literacy and Artistic works to which SA is a party state. The Act embraces all other acts or works done before its birth on the 1st of January 1979.CHAPTER 11 COPYRIGHT LAW Introduction All matters relating to copyrights in South Africa are controlled by the Copy right Act 98 of 1978.

musical or artistic work. The degree of resemblance is a matter of fact and not law.use or exploration of the work in order to compensate and reward the creator for the effort employed. d) Cinematograph films e) Sound recordings f) Broadcasting g) Computer programmes Requirements for a valid copyright *These have to be satisfied if a work shall enjoy protection.a copyright exists in a literary. engravings.these are what the law seeks to protect. 1) Thoughts or ideas contained in the work. Unless ideas are expressed in work. Statutory requirements a) Author be a qualified fellows -Author/creator should be a citizen of South Africa who is domiciled and resident there.g. and 2) the form by means of which the ideas are outwardly expressed. 132 . should have been incorporated by S.Independent skill and labour are requirements even where work has been copied. creativity and talent expended and utilized in the creation. c) Works made by and under state control All state controlled works/copyrights are governed and protected regardless of whether they comply with the above statutory requirements. .Originality not only refers to how thoughts were expressed but also to the thoughts themselves. so as to give the creator an incentive to create more useful works of intelligence. What constitutes a copyright? It has basically two components being. broadcasting visually and audibly. paintings. the law cannot protect.a work should conform to certain principles of public morality 2) Originality . Africa laws. adaptation distribution includes recitation. sculptures. . If it’s a company. b) Work published 1st in Berne Convention member Country For protection work should have been 1st published in a member country even if the author is not a qualified fellow.g. by reproduction. The creator holds the right to exploit the work in a material form e. Thus copyright law seeks to protect creators by awarding an exclusive right to benefit from their works even by transferring those rights for money. .It should be original and not a copied material . Catergories of works (Copyrights a) Literary works – literature b) Musical works – sung words recorded and written down c) Artistic works – e. Nonmaterial exploitation includes recitation performance. 1) Propriety :.

i) Literary. It is 50 years from making or 50 years from the year they were first published editions. 4) Illustration for teaching Exploitation by teaching is a defence provided the source is indicated.A substantial part should have been copied. 50 years from publication.The plaintiff (author) should prove the following. 133 . This includes broadcasts and published editions iv) Works by joint authors. iii) Sound Recordings. for reporting current events in the press and electronic media provided that the source shall be mentioned. Musical and Artistic works . 3) That the infringer had access to the copying. Is when one exploits a copyright without the owner’s authority for purposes of research.What is considered is the quality of copying and not the quantity. exposes for sale or hire a copyright c) Distributors the article in trade to the prejudice of the owner. It is 50 years after the death of the longest living author v) Works controlled by state. It is direct when one does an act prohibited by the Act. b) Sells. Indirect infringement is perpetrated when. Defences to infringement (section 12 – 19b) 1) Fair dealing. .Duration of a Copyright {Section 3(2)(a)-(f)} Once the term expires. ii) Photographs and Computer programmes. private study (a student). lets. a) A person intentionally imports an article in South Africa for purpose other than domestic use. 1) That the copyright was copied 2) That the copyright is the source of infringing work . extend to the author’s lifetime plus 50 years after his death. It is 50 years from his death if they were published after his death. for criticism or review. the work is no longer protected and its open to free use by the public. 2) Judicial proceedings Reproduction for judicial proceedings and reporting shall not be taken as infringement of copyright 3) Quotation Quotation in newspapers or periodicals does not constitute infringement provided the source and name of the author is indicated.Is both direct and indirect. 50 years after publication Infringement . .

delictual claims may be instituted here.” Trade mark: “Is any mark proposed to be used or used by a person in relation to goods and services for the purpose of distribution of such goods and services in the course of trade with any other person.5) Reproduction for broadcasts: The S. Definitions “Mark” according to Section 2(1) refers to “…any mark or sign capable of being represented graphically including a device. word. Special remedies There are moral rights referred to as paternity rights which accords the owner exclusive rights to use his work. An exclusive sub-leases has rights equal to the grantor’s rights and enjoys remedies for infringement TRADE MARKS Introduction: This law is governed by the Trade Marks Act 194 of 1993. Pattern. configuration. shape. B. The Act is in accordance with the Paris convention for the Protection of Industrial Property in 1947.” Registration All trade marks should be registered with the trade marks office where they are kept for public inspection (Section 22(3) ) Registrable Marks To be registrable. signature.g. letter mineral. ornamentation or the aforementioned . If infringed special remedies especially damages are claimable. Other remedies Just like unlawful competition. This is attained through its inherent nature or previous use (Section 9 (1) and (2)) Non-Registrable Marks These are trade marks that. A. a trade mark should have the ability to distinguish the goods and services of the owner of such trade mark from that of another. name. 134 . C can reproduce any copyright for broadcasting provided its destroyed after 6 months or any longer period agreed on by the owner. NB Ownership of a copyright can be transferred to another by cession / assignment. piracy audio/visual tapes. Remedies for infringement Civil Remedies a) The owner can site for damages for lost sales b) Owner can apply for an interdict to stop the infringer from doing so c) The infringer may be asked to surrender all infringing copies e.

The test used is whether the infringing mark is deceptively and confusingly similar to the registered mark. g) Deter the development of goods in industry.a) Fail to distinguish products and services b) Designate the kind origin. The owner should prove this. a) Interdict. 3) Unauthorised use of a trade mark identical to one established in S Africa the use of which is likely to cause disadvantage to the well known character even in the absence of deception and confusions. Well known foreign trade marks South Africa protects well-known foreign trade marks simply because its party to the Paris Convention for the Protection of Industrial Property.A trade mark is well known if: 135 . . j) Give offence to a class of people and in contra bonos mores. value. i) Contain words implying state patronage or indecency. c) Owner may claim for damages. c) Have become customary in current language d) The owner has no honest claim to ownership e) The owner wrongly applied for f) The owner has no intention to use it as a trademark h) Deter the development of goods in industry. NB Any other bona fide use of another’s trade mark is not infringement so long to acknowledges the true owner. Owner can stop one person from infringing his trade mark. 2) Unauthorised use of a mark in relation to goods or services that are so similar as to cause confusion Where similarity of goods or service can cause confusion then there is infringement. d) Owner may get reasonable royalty in lieu for damages. m) Is an imitation of a foreign mark of the same goods. h) Bear the South African seal and flag. Infringement **No person can institute litigation for the infringement of an unregistered trade mark 3 types of infringement : 1) Unauthorised use of an identical mark likely to cause confusion . purpose and quality. This means getting compensation even where there was no prejudice but potential prejudice. Remedies for infringement Section 13(3) provides for remedies being. mode and time of production or rendering of services. k) Is identical to another’s registered trademark l) Was applied for by 2 or more persons. b) Owner may get an order to force the infringing person to remove such a fake trade mark.

Where it is a multi-purpose invention and one purpose fails. c) Utility This means the invention should be useful. *The owner should show that the people will be confused if any other person uses such a trade mark. or has a real and effective industrial or commercial establishment in. PATENT LAW This is the law that relates to the protection of any new invention which involves an inventive step which is capable of being used or applied in trade or industry or agriculture (Section 25(1)) This area is governed by the Patents Act 51 of 1978 . . trade or agriculture are not patentable. . it ceases to be an invention – lasting value of utility. It should be new and not take the form of a previous invention that was exposed to the public in one way or another b)Invention step In addition to newness it should not be obvious. Any invention consisting of : a) Discovery b) Scientific theory c) A mathematics method d) A literary.An art is patentable if it does not involve or incorporate state art of a previous invention. It should work the purpose for which it was invented for.a) It is a mark of a person who is a citizen of a country that is a party to the Paris Convention: b) It is a mark of a person domiciled in. that addition is added to the main invention. Its not an independent patent. Procedure The inventor should make an application to the Patent office in writing fully describing the patent. how it works and its purposes.All inventions that do not related to industry. a country that is party to Paris Convention and practices business in South Africa.Where one adds or develops the main or previous invention.As long as the invention is not obvious. That is to say that it should be magnificently different from any previous state of art. then it’s a patent / new invention. it remains an invention. It has to be new (Novelty) Requirements for a valid patent a) Novelty: It has to be distinct. dramatic or musical work e) Data presentation f) Computer programme . Where it fails to achieve results associated with it.To determine this an expert in the field of that patent is used as evidence/ . .The following are not patentable. Can add diagrams and drawings to explain the 136 .

e) Where the demand a further patent is not met reasonably. 137 .patent. b) When the inventor charges exorbitant prices for his patent or licence. The application can be opposed by anyone with a just cause to do so. This is called infringement. If accepted then it is sealed for 20 years subject to renewal. The dependent can allege as defence any revocation by the inventor. Remedies 1) The patentee can seek an interdict stopping infringement 2) Can get an order forcing the infringer to deliver the infringing patent to the inventor. Patent Licences i) Voluntary licences: these are issued by the inventor who voluntarily allows some people to use his patent in return for money (Patent licencing agreements) Such a licence entitles the holder to use the patent as he wishes or even to dispose of it. b) Declaration of non-infringement Inventor is entitled to declare non-infringement to infringers c) The “threat provision”: Where one threatens to infringe the patent. Special remedies These are based on the following: a) National royalty Inventor is entitled to all damages he can prove. the inventor can apply for a “threat provision” barring the person threatening from doing so. d) Where the patent is left idle for no apparent reason in the opinion of the commissioner of patents. c) Where business is retarded in S Africa simply owing to the importation of the patent. If then an individual without authority from the inventor uses or disposes of the patent he is liable to the inventor in terms of the Act. Infringement and Remedies The benefits of registering a patent is to give the inventor exclusion of others. ii)Compulsory licences This is issued by the registrar of patents under the following circumstances: a) If the inventor of a dependent patents can not freely export his patent without infringing the rights of the inventor of the major patent. 3) Damages as per the loss incurred. The proper plaintiff is the inventor (patantee) or his licencees (to who he gave licence to use).

Historically however.CHAPTER 12 CONSUMER LAW A consumer is the final link on the channel of distribution or the user of commodities. The Zimbabwean constitution does not say anything about consumer rights. common law has provided for some mechanisms upon which the relationship between the consumer and producers were defined. In essence consumer law is a matter of balancing the legitimate interests of the consumer of goods or commodities against those of products. The following weaknesses can be observed from common law’s attempt to protect consumers namely: 138 .

*Section 4 (3)(a) gives the consumer the right to waive his rights which are given to him by the consumer Contracts Act. Section 2 of the Consumer Contract Act define a consumer contract as a contract for the sale and supply of goods and service or both in which the seller is dealing the course of business and the purchaser or user is not except employment and Hire purchase contracts. the existence of a Consumer Contracts Act. It is a 139 . .It started from the premise that consumers and producers had equal bargaining power. This was borrowed from the English law doctrine of consideration. . Section 4 gives a court power to do either of the following: . if any. on or after 24 June 1994. right or discretion under a consumer contract. This compromises consumer protection since some consumers may not know of their rights. . .Common law failed to realize that some consumers sign standard form contracts out of necessity. They adopted a hands off policy and this worked adversely against consumers who had little.The situation was worsened by the courts attitude towards these contracts.Contracts which result in an unreasonably unequal exchange of value or benefit or are unreasonably oppressive. *Sections 5 and 6 forbid or proscribes the following unfair consumer contracts or exercise or non-exercise of powers:. . Parties to a consumer contract should derive some substantial or real benefit from the contract.Setting aside or varying the exercise of power. . These principles provide that parties are free to enter into any contract and the court is bound to enforce what the parties have agreed. later on. It is generally agreed that the Consumer Contracts Act was promulgated. .Canceling or varying or only enforcing part of the consumer contracts that are unfair..Ordering restitution or awarding compensation to any aggrieved party to a consumer contract. This was excacerbated by the caveat subscriptor rule. The Consumer Contract Act applies to contracts which were concluded before. bargaining power.Contracts contrary to commonly acceptable standards of fair dealing.The common law principles of freedom and sanctity of contract worked against consumers.If the contract is expressed in a language not readily understood by a party (modification of subscriptor rule).Where the exercise or non-exercise of a power does not result in the protection of any party’s interest (consideration). . CONSUMER CONTRACTS ACT The main purpose the Consumer Contracts Act as provided for in the long title is to provide relief to parties to consumer contracts which are unfair or contain unfair provisions regarding the exercise or non-exercise of power or discretion or would be unfair.

(This is based on the Latin maxim volenti non fit injuria or voluntary assumption or risk). right. it would be easy to prove in a court of law with the express terms. The main problem with the Consumer Contract Act is that consumers are allowed to waive their rights through section 4(3)(a). . Hence our constitution has little if any. benefits of thing where one person is liable to pay or do or perform. *Section 2 defines a penalty as any money. empowers the courts to assist parties that are prejudiced by an unfair penalty stipulation. *Section 4 however. *Exemption clause for negligence – this imposes an obligation on the seller to exercise reasonable skill and deligence when dealing with customers. *Exemption clauses concerning the seller’s obligation to either (a) reimburse the buyer (b) replace goods (c) repair defective goods – these provisions encourage fair play. The following provisions are prohibited to all consumer contracts:*Voetstoots clauses – this ensures that good products are sold to consumers free from defects. Section 6 prohibits a person who accepts defective or delayed performance from claiming a penalty in respect to the defect or the delay. The rationale behind this section is that if any disagreement occurs between the parties. consideration of consumer rights as compared to rights like freedom of expression.Terminate the contract or .Enforce a penalty stipulation or a provision for excelerated payment of the purchase 140 . An unscrupulous seller can use that provision through standard form contracts to deprive the consumer of his rights. The court can order the benefiting party (creditor) to refund or reimburse the innocent party (debtor) any unjustly paid amount. Consumer protection is mainly crippled by the fact that the Zimbabwean Constitution which is the fundamental law of Zimbabwe does not provide for consumer rights. freedom of movement etc. (The unjust enrichment action can be invoked to protect the consumers in the event of unfair penalty stipulation). freedom of conscience. freedom of association. CONTRACTUAL PENALTIES ACT This act seeks to provide for the enforcement of penalty stipulations and to regulate rights and obligations of parties to agreements of sales of land through installments. It could have been much more helpful if rights provided for in the Consumer Contract Act were entrenched in the Zimbabwe Constitution Bill of Rights. This means that consumer rights are not regarded as part of the fundamental RIGHTS.favourable condition or provision to consumers because it ensures or guarantees a consumer some benefit from a consumer contract even though he may not be conversant in that particular trade. *Section 8 obliges a seller to give notice of at least 30 days when he wants to do the following on account of any breach of contract by the buyer:. Installments Sales of Land *Section 7 provides that every installment sale of land should be reduced into writing.Institute legal proceedings for damages.

Guarantee against eviction .Amount of installment .The rights in the Act are entrenched and are granted to the buyer of the merx under a Hire Purchase agreement by virtue of him being a buyer.When he is going through national service . *Section 5 provides that a Hire Purchase agreement should be reduced into writing and should state the following: . This definitely protects the buyer from undue strain in settling the Hire Purchase agreement under such predicaments. he will pay the seller the amount which is due.Pretium or purchase price. *Section 9 gives the court power to grant relief where it is just and fair to parties upon cancellation as termination of the installment of the sale of land. *Section 11 provides that there should be no waiver of rights under the Contractual Penalties Act.The amount of interest to be paid The seller should make the copies of the hire purchase agreement available to the buyer.Guarantee against latent defects. The buyer has an obligation to pay outstanding installments. *Upon termination.When the buyer has been hospitalized.This section is very favourable to consumers who may not even know of their rights under the Hire Purchase Act. deduct his commission for carrying out his work and give the remainder of those proceeds to the buyer (Section 20 of the Hire Purchase Act).Amount of deposit to be paid . The seller is supposed to pass ownership upon payment of the last installment All the implied warranties in contracts of sale should be present in hire purchase agreements. . HIRE PURCHASE ACT *Section 3 defines a Hire Purchase agreement as any sell of movable property where the pretium should be paid in two or more installments. *Section 8 invalidates exemption clauses. *Section 26 of the Hire Purchase Act provides that the buyer is exempted from paying installments in the following circumstances: . *Section 12 provides that every Hire Purchase agreement should have the following implied warranties:. However he has a right to terminate a hire purchase agreement but will lose the installments paid if he has paid less than half of the total amount of the pretium. Section 22 provides that the buyer will under no circumstance be allowed to waive his or her rights. From the proceeds of the sale. charging inflated interest etc. 141 . *Section 11 provides that the buyer should not remove the goods from Zimbabwe without the consent of the seller.price. a person will be appointed who will be responsible for the selling of products.

The rights and the protection of consumers under the Hire Purchase Act become useless because of the amount stated in section 4. sweets etc.The main problem with the Hire Purchase Act is that according to section 4 it applies to agreements where the pretium does not exceed $3 000. *** To constitute a contract of lease. In Latin it is called location conductio. Hire Purchase agreement will be governed by the unfair common law rather than the Hire Purchase Act. In the final analysis. the following essential elements must be present: Specified immovable property Parties should be ad idem as to the exact property being the subject matter of the 142 .It is a contract for the letting and hiring of immovable property wherein the landlord (lesser) lets out his property to another party called the tenant (lessee) who assumes occupation so granted by the lesser for a specific period of time and a specific sum of money called rent. Surely with the demise of the $(Z) (Zimbabwean dollar) the Hire Purchase Act will not govern any meaningful Hire purchase transactions except for small items like stockings. CHAPTER 13 LAW OF LEASE Definition: . It will make both theocratic and practical sense if the amount of pretium is increased to at least $1 000 000 to cater for inflation and other meaningful Hire Purchase transactions.

but for a specific period. He fails to do so if he delivers it occupied by someone who may be a trespasser or under colour of right. This requirement falls away if the creditor was aware of the situation. However. b) Specified period of time This aspect distinguishes a contract of lease from that of sale. Duties of the landlord a) Delivery of the leased property The lessor should deliver the property by making it available to the lessee by giving free and undisturbed possession. The common time frame is that of month to month subject to renewal and or termination by either party. reasonable rent shall be payable at market-related standards.contract. Parties may agree to let the lessee shoulder that responsibility. However. c) Specified sum of money This is called rent It may be money or part of the fruits of the leased property e. the lessor does not necessarily need to be the owner of such property for a lease agreement to be effective. c) Warranty against interference 143 . However. parties do not intend to let the property permanently as the case with a contract of sale. assuming occupation of dilapidating premises. leases at the will of either party. is valid but may not be terminated by notice of either party.g. In lease.g. Right and duties of parties Upon conclusion of the contract the parties take up rights and obligations. the law requires clear indication of waiver not a simple implication. especially the landlord. It is open to the parties’ agreement and mutual will. agricultural produce. this waiver of right should not interfere with duty to deliver a reasonably conditioned property. Parties should agree on the manner of payment. There is no regulation as regards the length of time. He must repair all such dilapidations and flows that may interfere with reasonable use of such property provided such faults are not caused by the lessee. A tenant can waive his right by conduct e. which should be registered if it is to be effective against a creditor or successor in title. Such of right by the lessee is enforceable in a court of law if it is clearly written down. otherwise generally a lease for 10 years or more is valid even if not registered and not written down. The property must be presentable internally and externally at delivery and its condition must be reason able. b) Maintenance Must maintain the premises so that they are fit for the purposes of which they are let. Where it is not stipulated. Formulation of the contract No formalities are strictly required save for lease agreements that are 10 years or more or for the natural life of the lessee. The requirement is satisfied if the court is in a position to determine what has been leased in the evidence placed before it. As was held in the case of Fryes (Pvt) Ltd Vs Ries.

A tenant can also sue for consequential damages-loss flowing from the defect of the property e.e. If this is not stated. As regards use of property. c) Duty to return the property undamaged Property should be in the condition it was when it was leased. Remedies of Parties Material non fulfulment by either party gives the innocent party an election. Household property destroyed by leaking roof. 144 . This duty is absolved if the property gets damaged. In the absence of a due date then there is a presumption that is shall be paid in arrears and not in advance. i. parties must expressly agree failure of which results in an implied fact that property shall be used for the purpose previously stipulated. he can claim damages only. then the tenant must pay before due date at any convenient place or he should make steps to establish that from the landlord. Lessor is liable for fraudulent non-disclosure of latent defects or for negligence or by reason of being a professional in that discipline similar to law of sale – Pothier’s rule b) Where the lord fails to maintain the property then the tenant can cancel the contract and quit the premises if want of repair has caused substantial inconvenience and 1 Hunter V Cumnor Investment 1952(1) SA 715. either to abide by the contract and sue for specific performance and claim damages as he suffered or cancel the contract and sue for damages. Remedies of the tenant1 a) Failure by the landlord to deliver may result in breach entitling the tenant to sue for damages after cancelling the contract or claim specific performance and damages. guarantee the tenant that he will not be disturbed by a third party without a legal right to do so. If it is not material the tenant can simply sue the lord for reduction of rent or may repair the property and sue the landlord for the expenses after serving a notice on the lessor. The lord guarantees that the tenant will not be disturbed in occupation by either the landlord or a third party. The landlord does not however. Specific performance is discretionary and will never be ordered where its now impossible. If the breach is immaterial.g. Any misuse results in an action for damages against the tenant. Duties of the tenant a) Payment of rent Must pay agreed rent in the manner agreed by the parties. b) No misuse of property Must make sure property is used religiously as per agreement excluding all manner of use that may amount to vandalism. It should be used for its purpose. destroyed or stolen without a tenant being in contributory negligence provided that the tenant proves that the damage was not out of his negligence. In the event of defective delivery if the defect is material then the tenant can cancel the contract and sue for damages. Rent shall be money or fruits of property as agreed by the parties.It is akin to the warranty against eviction in the contract of sale.

the right falls away. Where a forfeiture clause exists then the lord can cancel the contract if the tenant fails to honour his obligation to pay rent. If they are.g. It springs from the relationship of the parties but to make it effective the goods must be attached. ii) Where the tenant misuses property leased the lord has ordinary contractual remedies but where misuse is material he can cancel the contract. It is a condition precedent that the goods should be owned by the tenant or brought to the leased premises permanently with the consent of the owners. While the goods are on the leased premises. c) Where the lord fails to honour warranty against interference by his act then the tenant can apply for an order to stop him (interdict). This may not be prima facie evidence to show that he has waived the right to cancel. eviction then the tenant can cancel the contract and sue for damages. However. This is called the right of “quick pursuit”. Attachment is possible if the goods are not yet removed from the leased premises. Goods brought on Hire Purchase by the tenant are also subject to attachment if the owner does not notify the landlord. Classically the hypothec was effective only against goods as are “invecta et illata” – goods carried on to the leased property. However. the right to retention is lost. the landlord may interdict the tenant from misusing property iii) Where the tenant fails to return the property this is called “holding over”. Remedies of the “land lord” a) Non-payment of rent accords the Lessor a right to demand the same and if not paid within a reasonable time. This was held in the case of Spies V Lombard. the landlord has a night to arrest the goods in transit – process of removal to another place. To constitute material misuse the misuse should be “markedly serious and ruinous”. Consent may be express or implied. Its operative only when the rent is in arrear. the lesson may waive this right by conduct i. he can cancel the contract. It is unclear as to whether a landlord who frequently accepted late payments of rent can later on exercises forfeiture clause for future late payments. 3rd party’s property may be attached if the owner fails to notify the landlord and the landlord being unaware that the goods do not belong to the tenant.made premises comfortably inhabitable. This is also the position where a third party having legal rights interferes. Once delivered.e failure to enforce the clause forthwith. This is a security for arrear rent /payments over the tenant’s movables which are on the leased premises. If the third party has no such rights then the tenant proceeds against the third party and not the landlord. This is an additional substantial remedy to damages for breach. Alternatively and additionally. Land lord’s tacit hypothec The law implies the existence of a presumption to assist the landlord whether or not a forfeiture clause exists in a contract. eject the tenant with or without damages. the lord can enforce an interdict to bar removal. If the interference is substantial e. He may do 145 . As was held in Bloem foutein Municipality V Jackson property goods belonging to 3rd parties may be attached.

This is called the “huur gaat voor koop” doctrine. The sustenance of the subtenant is based on the duration of the tenant. If the lessor is not the owner of such property then he should prove his right to effect ejectment. Relations between parties and 3rd parties a) The landlord and 3rd parties i) Assignment: Its where the tenant transfers all his rights and obligations to a 3rd party. rent. No new lease comes into existence between the new landlord and the old tenant. At times an express agreement between the parties will render cession or subleasing void where they agreed that a notice to the landlord shall be served before effecting cession or sublease. In the absence of such an agreement. This is an example of novation and the agreement between tenant. There is no need for a cession of rights as assignment. Where the landlord sells property the general procedure is that the buyer (new landlord) is bound by the lease agreement. lessor and 3 rd party is required. The lessor should show that property got damaged during the time of lease. Any lease for more than 10 years shall not be binding on the new landlord if the lease is not registered or the successors in title are aware of the lease when they assumed status of being successors in title. Such 146 . Cession may take place where the tenant led all his rights to a 3rd party such that the latter will enjoy those rights. b) Tenant and third parties The death of the landlord does not extinguish the lease agreement. in fact.g. the landlord’s estate simply becomes the landlord. As regards damaged property the landlord can sue for damages unless the tenant can show that the damage was not out of his fault. The new lessor has rights enjoyed by his predecessor in title and the tenant should continue in occupation as long as he pays rent. In case of waiver of a right by the landlord. The effect is that a new lease agreement is introduced. the tenant remains liable for obligations e.’ As regards the period of the new lease. by remaining in occupation. it is presumed that it shall run indefinitely. However. Where the rights of the tenant have terminated. it is implied that the tenant can simply sublet or code save for rural land which strictly requires a notice and consent.e. The landlord can object to this and eject the tenant since he is now a trespasser. so do those of the subtenant. On the other hand. This doctrine is subject to statutory regulations. the 3rd party will exercise his rights against the original tenant whereas in cession the 3rd party is against the landlord. where he allows him to remain in occupation in a new lease based on the terms and conditions of the old lease is implied. This is called ‘tacit relocation. ii) Sublease: A 3rd party assumes occupation but the tenant remains liable for the obligations. In addition the lord will claim some damages that flowed from the misconduct of his tenant. but where ownership changes then there is no binding contract with the new lord. The difference with cession is that with sublease. if the lease is of short duration then the buyer (new lord) is not bound unless he was aware of the existence of the lease agreement at the time he made the purchase.

His compensation is far much more than that of a simple tenant. It was held in Tiopaizi V Byo Municipality that the notice should be reasonable e. It is small since the tenant gets the value of the improvements.The proprietor isn’t obliged to keep any records. Removal is only permissible if it does not damage the property. he is considered not to have stolen from anyone. What is disappointing is the quantum of damages. Generally once the lease is terminated the improvements belong to the landlord but the tenant is confined to his right to compensation.He is entitled to all the profits. Articles 10 to 13 are binding on South African law.This is when one person owns and runs the business alone. Discharge of lease agreements They are terminated in the same way contracts are terminated since this is simply a specie of a contract.knowledge is presumed if the tenant was in occupation at the conclusion of the contract of sale because if he had inquired. the right to compensation exists only where the improvements were made with the consent of the landlord.g. that is the lesser would have made premise available to that tenant up to the end of the lease and the tenant paid rent faithfully and returned the property undamaged. they do. the tenant can remove the improvements on termination or claim compensation for some. *Thus if a sole trader draws cash from a till without recording it in his drawings account. . . According to Article 10. a month’s notice in leases that are month to month. NB Any other contractual factors do terminate a lease agreement here. CHAPTER 14 INTRODUCTION TO CORPORATE LAW TYPES OF BUSINESS ORGANISATIONS 1) Sole trader . he would have been briefed on the facts. the landlord is not obliged to pay. In the case of planted trees. having in effect done no more than take 147 . A bona fide occupier or possessor is someone who develops someone’s property in an honest belief that the property is his yet it’s not. The old lease would has been terminated. Usually they are terminated by performance. In the absence of such consent. Indefinite leases are terminated by notice from either lord or tenant. Positive improvements Question: What happens if the tenant has made some improvements on the leased premises? These rights emanate from Placaat of the Estate of Holland of 1658.It is very easy to run. This is discharged when the lease ends. In terms of these articles. The question is “do these articles apply to all lease agreements?” The answer is. . the tenant gets the cost of planting those trees and not their value. This is the same state of affairs under tacit relocation. The right to remove applies to useful improvements not improvements which were necessary for the protection of the property.

The source of capital for sole trader’s business is himself. Since shares are offered to the public. Thus law imposes on partners a duty of utmost good faith towards each other. . Salomon v Salomon1 held that as a body corporate. limits the members to 50 excluding employees and ex-employees and prohibits any invitation to the public to subscribe for its shares or debentures. *Therefore the sequestration of the partnership estate necessarily involves the sequestration of the personal estates of all the partners other than dormant partners in a limited partnership. a company is a separate legal person in the eyes to the law.The sharing of the losses to the business is effective only as between the partners.If the business becomes insolvent the personal property of the partners is at risk. neither the members nor the directors are liable to repay. separate from its members or shareholders and directors.Is made up of between 2 and 20 people. So the members may limit their own liability (s7) may incur debts which. . 2) Partnership .S33 (1) to the Companies Act defines a private company as one which by its articles restricts the right to transfer its shares. in the absence of fraud or other special circumstances.his own cash from one pocket and put it in another. . c) Company limited by guarantee . 3) Companies *S22(2) of the Companies Act sums up the characteristics of a company by saying that from the date of incorporation a company becomes a body corporate with perpetual succession. There is no limit to the size of the membership of a public company. and the need for protection of investors is at its greatest. Partners are agents and principals to each other. *The risk involved in a sole proprietorship business is that if the business fails and the proprietor is unable to pay its debts (which are his debts) he faces the threat of insolvency and the loss of all his property whether or not it is connected with the business. b) Public Company .And the only way of limiting this liability is by setting up a limited partnership in which the dormant partner takes no part in the running to the business. .Here shares are offered to the public. a) Private Company . since each partner is jointly and severally liable to third parties for the full debts to the business. *Perpetual succession means a change of membership has no effect on the legal personality of the company. 148 .S7(b) as read with S26 to the Companies Act provides that a company limited by 1 1897 AC 22.

g. It may have a maximum of 20 members who must be individual natural persons acting in their own right excluding employees and ex-employees. (7) Universitas/common law corporation It is a body corporate having perpetual succession.They must elect directors and a secretary to represent and manage the company. They have since been consigned into the dust bin of company law history and are now only of historical interest. (6) Statutory corporations / Chartered Companies/ Parastatals . those who 149 . whose shareholdings and voting rights are restricted so as to maintain approximate equality. Promoters Must include those who convert their sole trade businesses into companies. capable of acquiring rights. owing each other and the Private Business Corporation a duty of utmost good faith and being agents of the business. 4) Private Business Corporation .Working on the principle that unity is strength. (5) Co-orperative Company / Co-orporative Society .These are sometimes called parastatals. . social clubs and associations. incurring obligations. such as the Old BSAC and University College of Rhodesia and Nyasaland. . . Its aim is not profit making e.guarantee has no share capital and the liability of its members is limited to the amount they guarantee to contribute on winding up. .Is established by the Private Business Corporation Act and enables a small business to become a body corporate with limited liability and perpetual succession.They are mainly companies in which a majority of the shares are owned by the state. charitable societies and sporting. . owed their existence to royal charters.The company must be licenced by the minister provided it exist for public interest.A Co-operative company is a public company which has as its main object the cooperative production or marketing of agricultural produce/livestock.Chartered companies or corporations. FORMATION OF COMPANY (floatation) **A Company is usually formed by promoters.A co-operative society carries on the same business on a small scale. . .It’s members are in a similar position to partners. acquiring and holding property apart from its members and suing or being sued in its own name.These are created by a particular statute. or the sale of goods to its members or both such objects. churches. co-operative societies negotiate bulk sales and bulk purchases for the benefit of their members. .

***Section 24 lists a number of names which are prohibited /branded as undesirable e. contracting for fixed assets / preparation of requisite documents.g. The Registrar has a wide discretion on the use of a company name. including the issue of a prospectus inviting the public to buy shares. The Registrar of Companies may refuse to register a name which in his opinion is likely to mislead the public. The promoter is liable for any misrepresentation made in the prospectus. Promoters are involved in the raising of capital.assist in raising companies capital. Newborn V Sensolid and Kelner V Bexter Held – That under English law. Here. Duties *A duty not to make a secret profit out of the promotion of the company. They provide it with ears through which it can hear and eyes through which it can see and hands through which it works. preparation of company documents except where they are statutorily excluded and taking it upon themselves to get the company going. the promoter may want to do certain things for the benefit of the company he wants to promote e. a name which is currently used by a registered company or suggestive of state patronage / patronage of the state president. a person cannot act as an agent of a non-existent principal / company. Here ordinary principles of contract as to misrepresentation will apply. This is confirmed by Section 47 of the Companies Act that provides for the ratification of pre-incorporated contracts. *A duty to supply the companies with an independent board of directors capable of making unfettered decisions. a person can contract as an agent or trustee of a nonexistence company especially for its benefit. the company does not have legal existence but the promoter doesn’t want to attract personal liability. In re contributories of the Rosemond Gold Mining Syndicate in liquidation Held – Promoters aren’t merely parents the companies they promote but also creators. They can’t complain if the law obliges them as it does to protect the companies through its infant life. *A duty to make an accurate prospectus. Pre-Incorporation Contacts Before incorporation. a promoter should submit 3 names to the Registrar for a name search. Mc Collough V Fernard Held – Under Roman Dutch Law.g. He must make full disclosure of the profits he makes. Names ***Before registration. to cause offence to any person / 150 . composition of the Board Directors etc.

The amount of share capital with which the company proposes to be registered with and its division into shares of a fixed amount **The provisions in the Memorandum and Articles of Association can only be enforced by a member in his capacity as a member and not outsiders. This took various forms namely: *Companies would include in their objects clause an unlimited number of objects which 151 .The name of the company . The argument was that those who invested in companies wouldn’t want to see their money used in activities they didn’t sanction.Promoters must prepare the Memorandum and Articles of Association. #The Memorandum the association governs the relationship between the company and the outside world whilst the articles govern the indoor management structures of the company. *Ultra Vires Power – carrying out activities beyond one’s power *Ultra Vires Capacity – carrying out activities that are beyond the provisions of the Memorandum Of Association. indecency or any name which he considers to be undesirable for any other purpose. their provisions would bind the companies and the members contractually. then the provision of the memorandum will prevail The Ultra Vires Doctrine States that the company should not carry out any other activity than those indicated in the objects clause (the Memorandum of Association). It must indicate the following: .The objects of the company . The name must end with the word ‘Limited’ as per Section 8 of the Companies Act. Constitutional Issues . In actual fact. Anything done beyond those objects was invalid. The memorandum of association should indicate the company name.That the liability of members is limited . #As time went on. Major parties in companies thus sought to modify the effect of the Ultra Vires rule. they were interested in a profitable use of their investment and a return (profit) thereof. creditors and companies themselves discovered that a strict application of the Ultra Vires rule prejudiced the company. Rather. it was clear that investors especially Corporate or Institutional investors weren’t so much concerned with what the company did with its capital. *Where the provisions in the Memorandum and the Articles are in contradiction. or a name suggestive of blasphemy. *S27 Provides that when the Memorandum and the Articles have been registered. Section 8 provides that the memorandum must be in English.class of persons. NB the purpose of the Ultra Vires Doctrine was to protect the shareholders and creditors against the unauthorized use of their capital.

the assets and liabilities of the company will still belong to the company and not the shareholder. *In the case of Parke V Daily News .It can sue and be sued in its own name and all the property that it acquires belongs to it as a company and not shareholders. .If a company is properly incorporated. In the exercise of his vote. The problem with the ancillary lever is that it’s difficult to know with certainty what activities are ancillary to others. assets and liabilities of a corporate person are separate from those of the shareholders. The right to declare dividends is given to directors in the Articles of Association. transfer shares. NB At law. Even where a person has got 100% shareholding in the company. The difficulty with the corporate benefit principle is to determine at which stage the corporate benefit will be derived. attend meeting and vote thereat to receive a share certificate. it becomes a separate legal personal and can therefore acquire rights and incur obligations and perform duties which are capable of being performed by a body corporate. there was a realization that business enterprises play a very important role in the societies in which they are located. . LEGAL PERSONALITY AND LIMITED LIABILITY THROUGH SHARE CAPITAL Corporate personality . strict compliance with forfeiture provisions. E. the courts would hold them to be valid.The rights contained in the shares are proprietary which the owner may exercise as he so desires. the court held that companies are allowed to carry out those activities which largely benefit the company.contains rights of members as members of the company and against each other. the shareholder’s right to proper notice of meetings. shareholders aren’t per se entitled to dividends but are only entitled where this is properly declared. Semble – Directors were now allowed to carry out any activity what so ever if they believe that it was for benefit of the company. 152 . However. Such a clause was held to the permissible in the case of Bell House Ltd V City Wall Properties Held – It’s the opinions of directors which is important here and not the opinion of the Court.g. he doesn’t owe his brother shareholder a duty of care. *The property. # The court also allowed companies to carry out activities which are ancilliary to the main objects although these activities weren’t specifically provided for in the memorandum. *Companies would include main objects and ancillary / subsidiary objects. Thus where corporate gifts are for societal development. *The Articles of Association .were sometimes unrelated. *Companies would include a concluding clause to the effect that the company would carry out any activity which in the opinion of directors would be for the benefit of the company.

The race / colour and creed of the owners did not have any effect on the legal personality of the company. A company could not be said to be white or Asiatic. Salomon V Salomon3 Facts – Salomon ran a sole trading business which dealt in sales and Salomon then decided to convert his sole trading business to a company. 2 3 [1916] 2 AC 207 supra.Daimler was a German company and during the course of the business. Dadoo Limited V Krugersdorp Municipality Facts – there existed during the apartheid regime legislation which prohibited non-whites from owning land in a certain area which was reserve for whites only.that Dadoo Limited was a company and enjoyed legal personality separate from its members. The municipality sought to enforce the legislation and remove Dadoo from the place.emerged. Daimler Company V Continental Tyre Company2 Facts. Once legal personality was established. The company then became insolvent and was liquidated. (i) Concession theory Holds that legal personality is just a concession by the state or a privilege granted by the state which the state may withdraw at any time. (ii) Realist theory Holds that legal personality does not exist in actual fact and a companies is indeed a separated legal person distinct from its members in reality. Held . the issue of shareholding couldn’t be material. 153 . paying D the money would be tantamount to trading with an enemy. These theories seek to define the concept of legal personality according to their own interpretation. it came to be owed money by continental Tyre Company. He had 96% shareholding in the company with the remaining 4% shares being owned by his wife and 3 children one each. Salomon gave money to the company and become a secured creditor of the company. Solomon claimed payment first since he was a secured creditor but the other creditors of the company objected arguing that since Salomon had 96% shareholding in the company. he was in fact the company himself and also that Salomon had formed the company as a Sham to get the money without paying it back. Held – Salomon’s Company was a legal person separate from Salomon and Since S had become a secured creditor of the company. During the course of the business. Mr Dadoo was an Asian and he formed a company called Dadoo Limited and it bought land in the white area and set up business there. he had to be paid first before all other creditors. The court upheld the argument. World War 1 broke out and D Company claimed the money owed to it by Continental Tyre Company which refused to pay arguing that since D was a German Company and German was at war with England.

JUDICIAL EVASION Courts have not seen the concept of corporate personality as a hard and fast rule. The court had to decide on the issue of jurisdiction. It exists in the contemplation of the law.(iii) Fiction theory – the company is a fictitious person created to enable it to transact business. Horne left employment and formed a company where he solicited the ex-employer’s clients. Gumede V Bandhla Vhukani Bakithi Facts – A law in South Africa provided that natives could only sue each other in the native courts. (v) Organic Theory – A company has different organs through which it transacts business. (iv) Juristic reality . Lee V Lee Air Farming Facts – Mr Lee owned nearly all the shares in Lee Air Farming Ltd. Once a company is incorporated. He was employed by the company as a chief pilot. The court lifted 154 . Lifting the Corporate Veil This refers to situations where the law ignores the corporate personality status given on the company. Horne argued that a company was a separate legal entity which had no contract with the ex-employers. Held – There was abuse of the principle of separate legal personality. A company cannot be said to be native or alien. The widow was claiming support under the workman compensation Act. a company becomes a separate legal person apart from its members. He was then sued for breach of the employment contract. it becomes a separate legal person distinct from its members. This comes in two forms namely (1) Judicial and (2) Statutory evasion. a company becomes a separate legal person distinct from its members. Gilford Motors V Horne Facts – Horne had an employment contract with Gilford Motors which had a restraint of trade clause to the effect that the ex-employee would not solicit the employer’s clients after leaving employment. Held – Mr Lee was an employee of the company although he owned the majority of the shares in it. A native was suing a wholly – owned native company in the magistrates court. He died in a flying accident whilst at work. Held – Once properly incorporated. In opposing this claim. They have given the following exceptions:(1) The courts will not apply the principle of corporate personality if it is abused by one of the parties.the company is a separate legal person because the courts recognize it as such. NB The underlying theme of these theories is that once properly incorporated. However.

Statutory Evasion The Companies Act lifts the corporate veil as follows:- 155 . The subsidiary was wholly-owned but using land which belonged to the holding company. As such. he argued that he could no longer deliver because the house had been sold to an innocent third party. Soon after prices skyrocketed or increased and he regretted the sale. He could pay for damages instead. The municipality wanted to compulsorily acquire land but it was supposed to compensate the owner of the land if he disturbed him in business. it is apparent that courts lift the corporate Veil whenever it is abused. (2) Courts also lift the Corporate veil where the principle of corporate personality runs contrary to state interests.the corporate veil and saw Horne busy breaching the contract. Mr Veldman was the majority shareholder in the company and also director. Jonnes had built the hut around himself to avoid delivery through abusing the principle of corporate personality. This supports the concession theory. In order to avoid delivery. The question was whether the holding company was disturbed in business. (See Daimler V Continental Tyre Company supra) (3) Courts may also apply the agency construction to lift the corporate veil by holding that a wholly owned subsidiary would be acting as an agent of the holding company. fairness and equity in reaching their decisions. Cattle Breeders Farm V Veldman Facts – Mr and Mrs Veldman lived in a company house. Held – The court rejected the argument and treated the company as a sham and façade. When sued for specific performance. The company wanted to evict Mrs Veldman from the matrimonial home because the property was now required by the Company for use by its director (Mr Veldman). Courts always take into account the principle of justice.The holding company was entitled to compensation since the subsidiary company was acting as its agent. Held . The court ignored the corporate personality principle. They no longer loved each other. he had to deliver. Held – The courts lifted the corporate veil because Mr Veldman used the corporate personality to avoid his duty to provide a matrimonial home to his divorced wife. Jonnes incorporated a company which he owned many shares. DHN Food V London Borough Of Tower Hamlet Facts – there were 2 companies – one holding the other a subsidiary. Note – From these cases. Leepman V Jonnes Facts – Jonnes sold a house to Leepman. sold the house to the company and effected delivery.

If a company can lawfully call itself “Ltd”. The word “Ltd” must be part of the name of the company (Section 9(1)) and must be prominently displayed on the outside of its offices. CAPITAL Can be raised either through shares or debentures. any person who is a member of the company during the time that it so carries on business after those 6 months and is cognizant of the fact that it’s carrying on business with fewer than 2 members. The whole basis of the protection afforded by the limitation of liability is contractual. . NB In all these sections. (If not fully paid up. . Limitation of liability . Any person giving credit to the company therefore. its capital and amounts still owing on the shares). and on its notepaper (S90(1)). *Section 124 – imposes liability on directors who fail to properly hold statutory meetings. has notice that if anything goes wrong. *The Memorandum of such a company must also state that the liability of the members is limited. the liability of members is limited to the amount each member has respectively undertaken to contribute to the assets of the company in the event of its being wound up. *Section 318 – directors are liable for fraudulent conduct of the company business. Hence the lifting of the corporate veil. *Section 186 – directors are liable for failing to disclose interests which they have in company contracts. SHARES 156 . *Section 58 and 59 – imposes civil and criminal liability for misstatements contained in the prospectus.This should expressly be provided for in the memorandum. Exception (S28 of the Companies Act) “If at any time the numbers of a company is reduced below 2 and the company carries on business for more than 6 months while the number is so reduced. or the amount still owing thereon if they are not fully paid up. In companies limited by guarantee. he will be confined to the assets of the company in order to obtain his money. no shareholder is liable to lose more than the capital he has already paid in respect of his shares if they are fully paid up.This means that in the case of winding-up due to insolvency.*Section 32 – imposes personal liability on a member who knowingly allows a company to carry on business for a period of more than 6 months without members. *Section 126 – directors are liable for failing to hold an extra-ordinary general meeting. it means that it’s limited by shares. individual members are being made liable for the company’s affairs. These are jointly and severally liable with the company. shall be personally liable for the payment of the whole debts of the company contracted during that time”.

They do not have a priority of payment of dividends. 2. 5.A debenture holder is a creditor of the company whilst a shareholder is a member who is entitled to attend meetings. debenture holders get first preference over shareholders because they are the secured creditors of the company. With shares. Ordinary shares They form the bulk of shares in the company. 157 .On winding up. Advantages In most cases. Redeemable shares To redeem is to buy back. Disadvantages . 3. Cumulative preference shares If a dividend is not declared this year. It should not be unlawfully reduced except in accordance with the provisions of the Companies Act. This is despite making profits.The rights of a debenture holder pertain largely to a receipt of interest calculated at a predetermined rate and which is payable at fixed times. Preference shares They entitle the shareholders to a certain percentage in terms of payment of dividends. Differences between shares and debentures . . *Once capital is raised. . they are in the majority and shareholders participate in decision making.Are bundles of rights which are measured in monetary terms in the first instance and interest in the second but also consisting of a series of mutual covenants entered into by all shareholders (Borland Trustees V Steel Brothers). .This may mean that ordinary shareholders may fail to get anything if the dividend has been consumed by preference shareholders. a dividend has to be declared when profits are made. . The shareholders are also entitled to be preferred in that payment. Debenture Is an acknowledgement of debt by the company to the shareholders or creditors. Participatory preference shares Shareholders participate in the sharing of profits when dividends are declared. 4. this dividend becomes cumulative to be paid when the next dividend is declared. TYPES OF SHARES 1. Those types of shares are those that a company reserves to buy back at a later stage.They rank after preference shares. it has to be maintained throughout the company’s trading period.

He can not obtain a contract for himself in the course of employment. but obtained his release from his position as Managing Director by stating falsely that he was ill. directors cannot be trustees because the legal ownership of the property they administer is not vested in them but in the company. of course.A director must account to the company for any personal profit he may make in the course of his dealing with the company’s property. or occupying a position of power and confidence with respect to another person. is to conduct the affairs of their principals in the interests of the principals and not their own benefit”. Duties to the company 1) Fiduciary Duties Secret profits and benefits from office – generally . or persons selling property to it or commission received from persons who supply goods to the company.He should also account for any gifts received (either of money or shares) from promotions. including directors of companies. He told the Gas Board that he was very interested. Facts – the Defendant was an architect of considerable distinction and attainment in his own sphere.Industrial Dvt consultants V Cooley [1972] 2 All ER 162. but the company was determined to pursue negotiations. the Gas Board decided to go ahead with the work in a modified form and to undertake a new project. Centlivres CJ summed up the position in these words: “It is. such that he is obliged by law to act solely in the interest of that person whose rights he is to protect. CASES .A director is supposed to negotiate for the company’s benefit. He negotiated to obtain for the company 4 contracts tentatively planned by the Eastern Gas Board. Later. not only in the contracts offered to him. NB Strictly speaking. ***Nkala and Nyapadi4 – A person possesses fiduciary duties when he is in a position of trust. He was also given firm details of the other contracts. The Board firmly indicated that it was not prepared to award the contracts to the company. 4 5 in their book entitled “Company Law in Zimbabwe. R V Milne and Erleigh5. The Defendant did not inform the company of these talks.DIRECTORS They are quasi – trustees of the assets of the company They manage the company. *The rationale for this is that there has been a conflict of interest. It approached the Defendant privately in respect of one of the contract provided he properly obtained his release from the company.” 1951 (1) SA 791 @ 828D 158 . The position of trust emanates from the agency-principal relationship between them and companies. He was appointed Managing Director of the Plaintiff’s construction company to help the company obtain contracts in the public sector. but also in the others. . clear that the duty of all agents. .

Subsequently. three Directors acquired the claims personally and they made a profit. The Defendant had one capacity. It is a curious position under which he should now say that Plaintiffs suffered no loss because he would never have succeeded in persuading them to change their minds”. After a change in the company management. One week after his release as Managing Director he obtained the contracts. it would have been the Defendant’s duty to try and persuade them to change their minds. The Board of Directors sat. and consequently he was under no duty to pass the information on to the company. 1. The Gas Board had approached him. a director may take advantage of a corporate opportunity on his own account if his company has considered the same proposition and rejected it in good faith. Master this – Nkala and Nyapadi convincingly contend that it’s not possible for a director to contract out of his fiduciary duty. Regal (Hastings) Ltd V Gulliver6 Held:by the house of Lords – that directors were liable to account to the company once it was established:*That what the directors did was so related to the affairs of the company that it could properly be said to have been done in the course of their management and in utilization of their opportunities and special knowledge as directors and. The Defendant denied any fiduciary duty as the contracts had not been obtained by virtue of his position as the Managing Director. 6 7 [1942] 1 ALLER 378.“Therefore it can not be said that it is anything like certain that the Plaintiffs would ever got the contract … on the other hand. considered the opportunity and turned it down on reasonable grounds. Held – that the Directors did not take a corporate opportunity and therefore they were not obliged to account. *That what they did resulted in a profit to themselves. he had allowed his duty to the company and his own interest to conflict. Held – that the Defendant should account.Whilst still Managing Director of the company he submitted detailed proposals for undertaking the work. but in his own capacity. NB However. not qua Managing Director of the Plaintiff Company. Roskill J held:. in pursuing this contract for himself. that of Managing Director. Further. the new management sought to make the Directors account for the profits they made. The company sought to make the Defendant account for the profits from the contract on the basis of his breach of fiduciary duty. there was always the possibility of Plaintiffs persuading the Eastern Gas Board to change their minds and ironically enough. [1967] 30 mlr 450 159 . He was under a fiduciary duty to pass on information acquired in his dealings with the Gas Board which was of concern to the Plaintiff. Pesso Silver Mines V Cropper7 Facts – Pesso Company was offered an option on mineral claims.

Negotiations ensued between the shareholders and the chairman and the two other directors. unlike the English Act. the greater reliance he places on others and the less legal responsibility he attracts. The company made huge loses through speculation of directors. Worse still. 2. Duties of directors towards shareholders Directors do not owe any contractual or fiduciary duties to individual members of their company unless there is an agency principal contract to this effect. *The court used the subjective test of negligence and found the directors not liable. Duty of care and skill Directors should not act negligently in managing the company’s affairs. The liquidator argued that the directors were liable. the less time he devotes to the business. The Plaintiffs subsequently discovered that the board had been approached by a 3rd party who offered a very favourable price for the shares.Directors are not allowed to make secret profits. 160 . our Companies Act. This results in companies incurring great losses because of too much relaxation on the test for negligence. The degree of skill is that of a reasonable person of their knowledge and skill and experience In re City Equitable Insurance Company Held – (i) A director is not bound to give continuous attention to the business of the company. Neither is he obliged to attend all meeting though he ought to attend when reasonably necessary. The court found that one of the directors was ignorant in business generally. employer etc. At the time Plaintiffs’ discovery. great need at law to impose stricter standards on directors to provide incentives for them to perform their legal duties for the benefit of the company. they had already sold the shares to the directors. shareholders and the general public. (ii) He is not obliged to see to the security and efficiency of the company personally. The Plaintiffs requested that the sale of their shares be put aside on the ground that the 8 [1902] 2 Ch 421. There is however. Re Brazillian Rubber Facts – Directors agreed to be directors of a Company where they had no knowledge of the business itself. Directors should exercise their independent discretion and make decisions according to the best interests of the company as his principal to the exclusion of the interests of any such nominator. (iii) the test for negligence is subjective. *Percival V Wright8 Facts – certain shareholders wrote to the secretary enquiring if he knew anyone wishing to purchase their shares. They owe them duties as a collective group. NOTE – What can be concluded from the common law position is that the fewer a director’s qualifications for the office are. does not make any director unfit for office because of glaring incompetence. The other director was of an advanced age.

Defendants should have disclosed the takeover to them. Held – that the directors were not under a duty to the shareholders to disclose this information even though they knew that the shares were more than the shareholders’ selling price. It was stressed in the judgement that there was no unfair dealing. The court found that the directors did not approach the shareholders with the view of obtaining their shares. Instead the shareholders approached the directors, and named the price at which they were desirous of selling, hence there was no question of unfair dealing in this case. Allen V Hyatt9 Facts – directors induced the shareholders to give them options for the purchase of their shares so that the directors might negotiate a sale of the shares to another company. The directors used the options to buy the shares themselves and then resold them at a profit to the other company. Held - Privy council that the directors had made themselves agents for the shareholders and must consequently account for the profit which they had obtained. Directors do not owe members any duties because they are not servants of the shareholders but of the company. Section 189 states that “In the exercise of their functions, directors may have regard to the interests and welfare of the company’s employees, the dependants of those employees as well as the interests of the company’s members”. NB The use of the word ‘may’ indicates that this duty is discretionary. It is dependant on the decision of an individual director.

Qualifications of Directors The Companies Act does not give any qualifications for directors. However, the following people are disqualified from being directors:- Unrehabilitated insolvents. - Minors or any people under legal disability. - Women married in community of property need written consents of their husbands. - A body corporate eg a company cannot be the director of another company. - A person convicted in Zimbabwe or outside for any case of commercial immorality eg forgery, fraud, theft and uttering. - Any person who is removed by a competent court from the office of trust on account of his conduct. *Directors are responsible for the management of the company. Each company should have not less than 2 directors, one of which should be ordinarily resident in Zimbabwe. Every company should also have a company secretary who is ordinarily resident in Zimbabwe.

[1914] 30 TLR 444.


Meetings of members The statutory meeting Not less than one month and not more than 3 month after it’s entitled to commence business every public company must hold a general meeting of members, which is called the statutory meeting (S124(1)). The object is to enable members to review, the initial progress of the company. Company affairs should be discussed fully (S124(7)). Annual General Meeting Must be held within 18 months of the company’s incorporation and thereafter within 6 months of the end of each financial year and not more than 15 months after the previous AGM. The registrar is empowered to extend these periods on good cause shown or to arrange a meeting (even of one person) which shall be deemed to be the AGM (S125). 21 days’ notice in writing of the meeting must be given, but short notice may be accepted by all the members entitled to attend and vote (S127). Issues to be discussed include “declaring a dividend, the consideration of the accounts, balance sheets and reports of the directors and auditors, the election of directors in the place of those retiring and the appointment of and the fixing of the remuneration of the auditors and any special business the general nature of which has been given in the notice convening the meeting.” Extraordinary General Meetings Deal with special business, the general nature of which must be given in the notice convening the meeting. This is to enable a member to attend the meeting and to prepare himself to deal with the special business. S126 requires an extraordinary general meeting to be convened by the directors. S127 requires 14 days’ notice in writing to be given (7 days in the case of private company) and permits this notice to be waived by the holders of 95% of the shares giving a right to attend and vote at the meeting. *An EGM may also be requisitioned by notice to the company from members holding not less than 5% of the paid-up capital carrying the right to vote. The requisition must state the objects of the meeting, and within 21 days the directors must issue a notice convening a meeting not less than 14 days (21 days if a special resolution is to be proposed) or more than 28 days ahead. If the directors do not act, half or more than the requisitionists may convene the meeting, being reimbursed by deductions from the fees of the delinquent (or stubborn) directors: S126. Conduct of meetings - Common law requires fair warnings to be given to members of matters to be considered at meeting. - There should be a quorum of 2, with an automatic adjournment of a week if the quorum is not present.


- The chairman of the Board should chair meetings and should have a casting vote. *Under common law, the chairman has a duty to enable members to discuss the matters before them fairly and reasonably – should keep order and prevent time-wasting. He should exercise his powers in good faith and with fairness. - Minutes of every meeting must be kept in a minute book, if signed by the chairman of the meeting or the next meeting, are evidence of the proceedings and prima facie evidence of their regularity (S138). VOTING AT MEETINGS The Act leaves it open to the articles to allocate voting rights in any way. It’s generally by show of hands unless a poll is demanded. *S129 provides for proxy voting. A proxy is entitled to speak as well as vote on behalf of the member(s) appointing him and need not himself be a member. Thus it’s sometimes convenient to appoint a lawyer, accountant or other expert. RESOLUTIONS - refers to decisions that are reached at meetings. *All decisions at meetings of members are taken by ordinary resolution i.e. a simple majority of the votes cast. On the other hand, a special resolution requires at least 75% of the total number of votes cast at a meeting. The Act requires a special resolution for the following purposes: alteration of the memorandum (S16(1)), alteration or the articles (S20), change of name (S25(1)), conversion of public into private company (S33(3)), issuing shares at a discount (S75(1)), placing uncalled capital to reserve (S86), alteration of share capital (S87(1)), reduction of capital (S92), investigation of company affairs (S158(a)(1)), winding up by the court at (S206(a)), voluntary winding up (S242(b)), sale of bus or property in voluntary winding up (S250), arrangement with creditors in voluntary winding up (S260), instructions of liquidator in voluntary winding up (S263(1)), making provision for employer and employees and their dependants on cessation or transfer of the company business (S287). SPECIAL 21 days notice should be given, specifying the terms of the resolution and the intention to propose it as a special resolution. The holders of not less than 25% of the votes of the company must be present in person or by proxy, the resolution must be passed by not less than a 75% majority of the members present (S133(1)). The resolution must be transmitted of the registrar for registration within 1 month (S136). A resolution requiring special notice is required for the removal of a director before expiration of his term of office (S175) or for replacing an auditor (S151) or for any other purpose specified in the articles (S135(1)). 28 day’s notice must be given to the company, which must then give 21 days’ notice of the resolution and send a copy to any person whose status will be affected by the resolution (S135). WINDING UP Is a process by which a company’s existence is brought to an end and may take the form of winding up by the court or voluntary winding up.


the court will consider the matter and decide whether or not to grant a winding up order.If the company is unable to pay its debts.If 75% of the paid-up share capital of the company has been lost or has become useless for the business of the company. They converted this partnership into a private company and were appointed its first directors.If the company has by special resolution resolved that it be wound up by the court. It should be served on the company and the court should grant an order allowing the company ample time to prepare and present its case. *Contributory – a person liable to contribute to the assets of a company in winding up (S202). Effect of winding up order Its immediate effect is to freeze the company’s affairs in a number of respects . Mr Ebrahimi then petitioned the court to make a winding up order. However.If the company ceases of have any members. Upon presentation of 164 . Procedure The applicant must proceed by way of petition (S207) which must comply with companies (winding up) rules S1841 of 1972 rule 5. Soon Mr Nazar’s son was admitted into the company through a donation of shares by both parties. . Held. Winding up is deemed to commence at the time of presentation of the petition (S210(2)) which means when it is filed with the registrar of the High Court. .Winding up was ordered on just and equitable grounds because Mr Nazar and his son had oppressed Ebrahimi. . Who may apply for winding up by the court S207(1) provides that an application for winding up by the court may be made by the company. Ebrahimi V West bourne Gallaries Facts – Ebrahimi and Mr Nazar carried out a partnership business where they had equal shares.If the company does not commence its business within a year from its incorporation or suspends its business for a whole year.Grounds for winding up by the court S206 sets up grounds on which a company may be wound up by the court namely: . the father and son colluded to kick out Ebrahimi from the company using a general resolution. .S207(2) adds the master of the High Court to the list if the application is to convert a voluntary winding up into winding up by the court.If default is made in lodging the statutory report or in holding a statutory meeting. . a contributory or the minster.g. . a creditor.If the court is of the opinion that it is just and equitable that the company should be wound up e. where the main objects have become impossible to achieve and where the company is commercially insolvent and winding up is the only means by which credit can obtain payment.

Calling meeting between the company and creditors every six months or whenever necessary. *He can calculate the shortfall. 165 . the liquidator is appointed. the powers and duties of the directors also cease etc. Otherwise it’s the creditors’ voluntary winding up (S246).Where the action was instituted prior to liquidation. share transfers and alterations in the status of members may no longer be made. empowered. remunerated and if necessary replaced (S249) by the company in a general meeting. He should sell company’s assets with the authority of a joint meeting of creditors and contributories with leave of the court keeping a proper account of all transactions. He will then prepare the necessary documents and hand them over to the master. In the event of a company being unable to pay its debts. Voluntary winding up *Is by special resolution which should be advertised and sent to the master. without 1st excusing the company. He should identify creditors and contributories and how much they are owed by and owe the company respectively. before the special resolution. disposition of property. the special resolution must be followed by a creditors’ meeting organised by the company to receive a statement of the company’s affairs and to nominated a liquidator. attachments and executions are stayed. *If. There appear to be 3 circumstances in which a creditor can proceed against a company in voluntary liquidation. the company’s property is deemed to be in the custody or control of the master until a liquidator or provisional liquidator is appointed. The master then applies to the court for dissolution. the winding up becomes a member’s voluntary winding up.Where the claim arose from expenses incurred in winding-up. *The liquidator must give notice of his appointment to the master. and name the contributories that are able to compensate the shortfall. if any. These are:.proceedings. On application by a creditor or contributory (S265) or by the liquidator the court may convert the voluntary winding up into a winding up by the court. Winding up commences from the passing of the resolution. when the company is required to cease business except in so far as may be necessary for its beneficial winding up (S245). The process of liquidation That liquidation should ascertain the total of the company’s liabilities from the proofs of creditor’s claims (S220). the directors give security for payment of the company’s debts or furnish the master with the prescribed proof that the company has no liabilities. He should take into account directions given by meetings of creditors or contributories. *Since directors have no interest in a members’ voluntary winding up. *In a creditors’ voluntary winding up. Liquidator His 1st duty is to recover and reduce into possession all the company’s property and open a bank account (S224). . creditors may proceed against sureties of a company being wound up. *He can open a liquidator’s account.

pages 63-4 166 . an insolvent is a person who accrues more liabilities than what his assets can pay for. But today. hoping for slavery rather than death1. As was mentioned in Chapter 2. a person now retains his freedom but hands over his property in accordance to the Insolvency Act [hereinafter referred to as the Act. due to the advent of human rights.Where despite the presentation of a claim of the liquidator. CHAPTER 15 INSOLVENCY Is governed by the Insolvency Act [Chapter 6. Early Rome saw a debtor who was unable to pay his debts surrendering himself to his creditor. he refuses to make a decision upon it.04]. 1 Scott – The Civil Law vol 1..

see Ex parte Milton 1959 (1) R &N 377 / 1959 (3) SA 347 and Ex Parte Matabeleland Club 1962 R &N 4 3 1939 SR 25 4 Ex Parte Berman 1972 (1) RLR 230. This procedure is not rigid.That the surrender will be for the benefit of creditors generally. trusts which are capable of owning property and clubs which do not carry on business for profit 2. . The petitioner must publish the rule nisi in the Government Gazette and a circulating newspaper [s 5] and on the return day the court may (if satisfied on all points including publication) grant a final order of sequestration [s 6].That the estate is insolvent [s 4(1)(b)] – ie that it has more liabilities than assets. be condoned is there could be no prejudice of any interested party. The debtor is relieved of liability for his debts. In Ex Parte Spence5. it may grant a provisional order of sequestration and issue a rule nisi calling on interested parties to show cause why the provisional order should not be made final [s 4(1)]. the Act applies to individuals. The petition must satisfy the court on the following 4 matters: . *If the court is prima facie satisfied on all these. According to section 2 of the Act. but remains under certain legal disabilities unless he successfully applies to court for rehabilitation. the court held that any irregularity in procedure may. 5 1959 (3) SA 933. It was important to state whether he was now in a salaried position or not and whether he had other sources of income.***In a nutshell. 2 167 . SEQUESTRATION AND ATTACHMENT OF PROPERTY The Act applies to every debtor except a company or other association which may be wound up under the Companies Act. the cause of insolvency and other matters connected with the estate. FORMS OF INSOLVENCY (1) Voluntary surrender – this ensues when the debtor or his agent surrenders his estate for sequestration (see Section 3). as well as the financial position of the applicant apart from the business and the prospect of obtaining remunerative employment.That the estate contains sufficient free residue (i. Ex Parte Marais3 convincingly held that the information in the petition must include “…the nature of the business. partnerships or associations of not more than 7 members. in the court’s discretion. . . the Act provides that a debtor who cannot pay his debts may be ordered by the High Court (either on his application or that of the creditor) to hand over his property to a trustee for sale and distribution among his creditors.” It should also include a statement of the debtor’s affairs.e assets over which no creditor has a particular right of preference) to meet the costs of sequestration [s 4 (1)(a)].That the debtor has made a full and honest disclosure of all relevant facts4. Usually. this is done by way of petition to the Master of the High Court [s 3(4)].

the trustee has the discretion to either abide by the contracts (which involves performance of the insolvent’s obligations) or to terminate them.A minor or other person under legal disability . the creditor should satisfy the court that sequestration will be to the advantage of creditors. . The insolvent is obliged to attend the 1st meeting unless excused [s 67(1)] and may be subjected to examination.A body corporate. The 1st meeting of creditors – one of the reasons why notice of every order of sequestration must be given to the Master is to enable him to call the 1st meeting of creditors of the insolvent. However. Procedure up to the 2nd meeting of creditors. Should be appointed by the High Court upon being petitioned by a creditor who feels it desirable that the debtor’s estate should be placed under immediate control. However.The insolvent’s contractual capacity is unaffected. The provisional trustee. 168 .The debtor’s existing contracts at the time of sequestration can be terminated. . . R v Etberg6 held that the status of insolvency stops at international boarders and a person who is insolvent or bankrupt in any foreign country will not be regarded as insolvent in Zimbabwe. .The insolvent is deprived of ownership of all his property. Election of a trustee – no professional qualification is required but the candidate must not be: . the High Court has special jurisdiction at times to order the insolvent to pass ownership to a 3rd party who acquires property from him in good faith and for value. . 6 1932 AD 142.The insolvent is also deprived of the power of acquiring ownership of property [s 23 (2)(b)]. but he may retain his clothes and bedding and such furniture and tools as the Master may decide to leave him. which he does by notice in the Government Gazette.Himself an insolvent .It imposes legal disability on the debtor. . The object of the meeting is to enable creditors to prove their claims and elect a trustee [s 53(1)].Resident outside Zimbabwe. It will be presided by the Master or hs deputy [s 52]. However.Have been once convicted of a commercially immoral crime etc. . the insolvent must get the consent of the trustee. The procedure is akin to that of voluntary surrender. if the contracts affect estate property. which vests in the trustee [ss 23 & 39].The insolvent is also disqualifies from holding positions of trust like that of a Company director. However.(2) Compulsory Sequestration – occurs when a creditor(s) petition the High court to sequestrate the debtor’s estate owing to either non-payment of debts or that the debtor’s estate is insolvent or that he is ‘commercially insolvent’ in the sense that he cannot pay his debts without selling his assets. Effect of sequestration .

the trustee must give a report of all the transactions carried out. (b) A voidable preference – is any disposition of his property made by the insolvent less than 6 months before sequestration which has the effect of preferring one creditor (in a surety) above another. . If they do not. The 2nd meeting.Performing legal transactions on behalf of the insolvent. calling upon debtors of the insolvent to pay their debts to him [sections 75 and 91].Taking necessary steps to recover debts owed to the insolvent. then the Master may appoint one.Whether he has made a subsistence allowance to the insolvent under section 93 and why . with full particulars . He also opens a bank account and safeguards the insolvent’s books of account. such as a gift7. He must then advertise his appointment together with address in the Government Gazette. with the intention of preferring one creditor above another.The cause of the debtor’s insolvency . The report should include: .Paying off creditors (with the permission of the Master) using the proceeds of the insolvent’s estate.Whether he had carried on the insolvent’s business. 7 see Huizenga v Zwinoira 1987 (2) ZLR 276. . Duties of the trustee . he does not take office until he has given security to the satisfaction of the Master and received from him a certificate of appointment. (d) A collusive dealing – is a transaction entered into by the insolvent before sequestration in collusion with another person for the disposal of any property belonging to the insolvent which had the effect of prejudicing his creditors or of preferring one creditor above another.He is elected by the creditors present at the 1st meeting. with a list of purchases and the trading results. Impeachable transactions Refer to the power given to the trustee to set aside certain transactions carried out by the insolvent before he was sequestrated.Whether any legal proceedings were suspended by the sequestration and are pending or threatened. Here.All matters relevant to sequestration .The assets and liabilities .Whether the insolvent appears to have contravened the Act or has committed any other offence.The books relating to the debtor’s affairs . The insolvent’s property vests in him. Such transactions include: (a) Disposition without value – is any transfer or abandonment of the insolvent’s rights to property not made for value. 169 . (c) An undue preference – is a disposition of his property made by the insolvent at any time when his liabilities exceeded his assets.To uphold some of the insolvent’s contracts. If the trustee is appointed by the creditors. . .

*A trading account – showing opening and closing stock. Sections 121-124 provide that the nature of the accounts include: *A liquidation account – showing the trustee’s receipts and disbursements. . Creditors may vote on any matter concerning the administration of the estate. *Cash payment (provided by the insolvent’s friends and relatives) in return of all the insolvent’s assets to him. the object of which is to prevent the normal sale of all the insolvent’s assets and distribution of the proceeds among creditors. and what action he has taken. failure of which attracts a criminal offence. preferent and concurrent creditors or a plan of distribution showing the amount each creditor is liable to contribute.If the insolvent has been sequestrated on a previous occasion and 3 years have elapsed from the confirmation of the trustee’s 1st account. Sale of goods – where no composition has been agreed. *A plan of distribution – showing the amounts awarded to secured. the trustee’s primary duty after the 2nd meeting is to proceed as rapidly as possible with the selling of the estate’s property and the distribution of the proceeds. 170 . unless the insolvent has been convicted of a fraudulent act in relation to the existing or any previous insolvency [s 141(2)(b)].Whether the contract to buy immovable property or any lease was affected by sequestration. daily totals of receipts and payments and trading result. The object of this meeting is not only to give the fullest information to the creditors but to enable them to give instructions to the trustee on items (f) to (j). The offer can come in the following forms: *A scheme whereby the insolvent is allowed to continue his business under the trustee’s supervision and a committee of creditors in exchange for regular monthly payments to be paid to the trustee for distribution. REHABILITATION Is a process whereby an insolvent applies to return to normal. The application to the High Court for rehabilitation may be made in 5 circumstances namely: . The Trustee’s accounts – must be produced within 6 months of appointment [s 118] unless the Master grants him an extension [s 119]. Procedure after the 2nd meeting. The insolvent should be examined especially on the 2nd meeting. Composition – the insolvent may submit to the trustee an offer of composition anytime after the 1st meeting. . whichever is the earlier [s 141(2)(a)].. The insolvent should attend either the 1 st or 2nd meeting or both meetings. but not on matters concerning its distribution.If the insolvent has obtained a certificate from the Master that his creditors have accepted a composition [s 141(1)]. .If 12 months have elapsed since the confirmation of the trustee’s 1st account or 2 years from the final sequestration order.Any matter in regard to the administration or realization of the estate requiring the directions of the creditors.

A partnership cannot be rehabilitated but individual partners can [s 145]. to discharge all the insolvent’s presequestration debts which did not arise out of any fraud on his part and to relieve the insolvent of every disability resulting from the sequestration. It should be signed by at least ¾ of the majority of creditors. The Master of the High Court supervises whatever the parties agree to in the Deed of Assignment. ASSIGNMENT A debtor who wishes to obtain the advantages of insolvency without the corresponding disadvantages may agree with his creditors to hand over his estate to a person (called the assignee) to be administered for the benefit of the creditors through a contract known as a deed of assignment. 171 .At any time after confirmation of a plan of distribution providing for payment in full of all proved claims. nor the liability of a surety for the insolvent nor any liability to pay a penalty or suffer punishment under the Act [s 146]. . The effect of a rehabilitation order is to put an end to sequestration.If the insolvent has been convicted of a fraudulent act in relation to his existing or any previous insolvency and 5 years have elapsed from the date of conviction [s 141(2)(c)]. The debtor must publish the notice and registration of the assignment in the Government Gazette and local newspaper.. with interest. and the costs of sequestration [s 141(4)]. Rehabilitation does not affect rights and duties relating to a composition or to property not yet distributed.

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