ASSIGNMENT TWO

QUESTION 1

Many business transactions are carried out through agents.

(a). Explain five (5) ways in which agency can be terminated.(5)

The normal rules of terminating a contract apply to the contract of Agency since it is a type of a
contract. The following are the ways of terminating Agency according to Christie (1998) and
Gibson, (1988);

(1). Performance or completion of the mandate.

This means that all parties to the contract have fully performed their sides of the contract. Once
this has been done, the agency comes to an end.

(2). Renunciation or rejection by the agent.

Renunciation of the mandate by the agent terminates the agency. The agent may renounce at
any time but there must be given by the agent. If there is no good cause or reasonably notice,
the agent may be liable for damages. Good cause may be strange relationship between agent
and principal so that they cannot work together or lack of trust or good faith.

(3).Revocation by the Principal

The principal can revoke the agency and he is only liable with damages if there had been
express or impliedly that the agency should not be revoke then it is an irrevocable one, the
principle may revoke but must pay the agent for any losses suffered as a result of revocation.
Situations of irrevocable agency come before the period set up for agency has not expired.

Where an agent enjoys a kind of authority with personal interest of his own, i.e. to transact
business for his protection and not for the benefit of the principal. This kind of agency authority
is often described as procurator in rem suam (especially if the act is irrevocable).

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4. Expiration of time.

Where the contract of agency is to run for a set time, for example one year, the agency comes
to an end when the time is up.

5. Impossible of performance

When performance of a contract obligation becomes impossible of performance through Vis

Major (act of God or state) or Casus Fortuitous (inevitable accident) i.e. through an event which
cannot be avoided even if ordinary precautions are taken, the obligation is in general
discharged as if it had been impossible from the inception.

(b).Discuss how agency is created. (20)

A contract of Agency may arise or be formed in different ways. However, as with all contracts,
there will usually be an offer plus an acceptance, thereby creating the agreement. Generally
speaking, the principal requires the normal contractual capacity and, provided this is present,
he/she is free to enter into contracts through the agent. However, there can be no question of
acting through an agent where the principal is under a statutory duty to perform the act
personally and the personality or personal skill of the principal is important to the third party.

Usually no formalities are required to conclude a contract of agency, provided agreement is

reached on the act to be performed and the commission, if any, to be paid.

Nevertheless, certain acts, if performed by an agent, require written proof of the agent’s
powers. This document is referred to as a Power of Attorney. A power of attorney may be
special that is, for one transaction only or general that is for more than one transaction.

The following are the various ways of creating agency;

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(1). Express Authority

According to Bampton & Drury (1994), the parties have to agree expressly as to what the agent
has to do on behalf of the principal and remuneration given to the agent, and this is unlikely to
lead to a dispute about the existence of the relationship of agency in future.

(2). Authority implied by Law

Bampton & Drury (1994), also went on to refer authority implied by law as another way of how
agency may arise. These are certain relationships between persons where the law itself will
imply that agency exist from the particular connections between those persons. The law
provides that certain persons who are considered incapable of handling their own affairs should
be represented in such affairs:

(a). guardian represents a minor

(b). trustee acts for an insolvent person

(c). a curator represents an insane person

(d). negotiorum gestor represents a person acting for a third party for necessity.

(e). Board of Directors acts for a company.

(3). Implied Authority

Gibson (1988), states that, the contract of agency may be implied from the behaviour or actions
of the principal, and will be determined by the facts of the particular case. It is essential to ask
the question: “Was the authority reasonably necessary to, and readily inferred from, the
mandate the agent was given?”

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If a principal employs a servant or agent in certain capacity, it is generally recognized that the
servant has authority to do certain acts and the principal is bound even though he never
expressly or impliedly sent the servant to do these acts.

For example in the case of Karol Vs Fiddel, the facts are that Karol owned a hotel, he allowed
Fiddel to negotiate for the sale of the hotel to potential buyer. Price was agreed and had sought
his presence at the final negotiations and offered him on numerous occasions various amounts
of money. It was inferred that during negotiations that Fiddel was making negotiations as
Karol’s agent.

It was held that implied agency was proved because Karol had allowed Fiddel to sell the hotel
and also Karol was paying Fiddel money that could be described as commission.

Where an agent has been authorized, whether expressly or impliedly to do a particular act, he
may have an implied authority in addition to performing acts which are not strictly within his
authority as happened in the case of Roads Motors Pvt Vs Pringlewood, a car salesman,
although not having actual authority to instruct a customer to make out a cheque to a different
company was held to have authority to do so by virtue of his employment.

(4). Agency by Estoppel

This is where a person (principal) has not in fact authorized another person (agent) to act on his
behalf but by his conduct (principal) has led another person (third party) to believe that he has
so authorized the agent, the principal is estopped or prevented later on from denying the acts
done by his agent if that reasonable person (third party) acts on them to his disadvantage.

According to Christie (1998), estoppel is a rule of evidence which states that, where the conduct
of a party is such as to suggest that a certain thing is true, the party cannot subsequently deny
that it was true.

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The Conduct likely to lead to the creation of an Agency by Estoppel is the repetition of a
transaction on a number of occasions as well as acceptance of state of affairs by the principal
without objection.

A person who seeks to set up agency by estoppel must establish the following situations:

(a). that there was a representation by the principal either express or implied by conduct,

(b). that the representation was of such a nature that it could reasonably have been expected
to mislead a third party,

(c). that the third party must have acted on the faith of the representation,

(d). that third party must have been prejudiced as a result of acting on the faith of that
representation,

(e). that third party must be unaware of the agent’s lack of authority.

In the case of Quinn and Co. Vs Witwatersrand Military Institute, the court found out that
Quinn and Company reasonably believed that the institute will honour the bill and that by
providing services in respect of the previous dealings they acted in the faith of the institute
hence Quinn and Company succeeded.

(5). Ratification

Havenga et al (1992), mentioned that this occurs when a person without his principal’s
authority makes an agreement with a third party and thereafter the principal gives his authority
to the agent and therefore adopts and is bound by the contract. A contract of agency then
comes into existence and the ratification dates back to the time of the original act. Ratification
may be express or implied.

The following Requirements must be met for Ratification to take place;

(i). Profession of authority.

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The agent must make it clear to the third party that he was acting in the capacity of agent.

(ii). Principal named or ascertained.

At the same time the agent must have in his mind the identity of a particular or supposed
person as his principal.

(iii). The act must not have been illegal.

There can be no ratification of an act which is prohibited and made illegal by statute.

(iv). Principal must have been in existence.

The principal must have been in actual existence when the agent concludes the contract with
the third party. The principal can apply if the original contract shows some indication that it is
made for the benefit of the third party. An agent can on behalf of non- existing company enter
into contracts as long as it is for the benefit of the company for example pre-incorporation
contracts.

(v). The principal must be capable of ratifying if he lacks contractual capacity, he cannot ratify.

(vi). Ratification must embrace the whole transaction

(vii).Only that principal can ratify the contract

(viii). The intention of the principal to adopt the particular contract must actually be
communicated to the agent or third party.

(6). Negotiorum Gestio

According to Bampton & Drury (1994), it arises where there is an emergency situation. There
are no general circumstances for when this may occur. A person who acts for another in a case
of necessity or an administrator of someone’s affairs is referred to as negotiorum gestor. For
example, if a person sends cattle by rail, and there is no one there to receive them at the

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station, then if the railway employees (“servants”, in the legal sense) feed and water them, the
railway administration is a negotiorum gestor or “agent of necessity”. The owner of the cattle
must reimburse the railways for their expenses incurred.

The following are certain requirements for this agency to be implied:

(a). a contractual relationship must have existed between the parties but a stranger can also
become an agent.

(b). there should be an emergency, particularly if goods are in danger.

(c). It must be impossible to communicate with the owner

(d). the agent must have acted in good faith and in the best interest of the principal.

(7). Stipulatio Alteri

Also referred to as ‘contracts for the benefit of third parties’, in our legal system it is possible to
enter into contracts of this nature, whether or not the third parties are in existence at the time.
Thus it is possible for a parent to enter into a contract for an unborn or minor child, for
example.

These contracts may also have the disadvantage of binding the ‘agent’ should the third party
not accept the benefit of the contract entered on his behalf as stated by Manase and Madhuku
(1996)

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QUESTION TWO

(a).Explain four duties of the employer in an employment contract.(8)

According to Havenga et al (1992), the employer has the following implied duties,

(a). Payment of remuneration

The employer should pay the stipulated wages or salaries when due. The amount is governed
by the agreement between the employer and employee but should not be lower than the
maximum prescribed for the industry and grade of work.

The General Rule is that the employee is not entitled to remuneration unless he has done his
work except were such failure is not due to his fault e.g. were employer suspends him pending
investigation. If the employee refuses to work he would not be entitled to pay.

Where an employee is dismissed before payment date, the employer is obliged to pay for the
benefit of the services which the employee rendered to him up to the time of dismissal.

(b). To provide work

In general the employer has no obligation to provide work but there are certain exceptions
where he should do so:

(i). Where the remuneration of the employee depend totally or partially on performance of
work.

(ii). Where failure to provide work lead to loss of reputation or professional standing.

(c ). To provide good working conditions

The employer has common law duty to provide reasonable care for the safety of employee.
Action can be brought against an employee who fails in this respect unless the employee is
covered is covered by the Workers Compensation Act.

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At common law the liability of the employer for death or injury of an employee depends on
proof of negligence on the part of the employer.

If an employer orders an employee to work in a condition which he knows to be dangerous

then he will be liable in case of injury or death.

(d ). To be vicariously liable

The General Rule is that the employer is liable to third parties for injuries or damages arising
out of the wrongs committed by his employee within the scope and in the course of his
employment.

The principle applies whether the injuries was to an outsider or to a fellow employee. The law presumed the
employee to be an extension of the employer. (i.e. Agency). The employer is liable even though he was not in
any way at fault and this rule which seems at first sight to be unfair to the employer is based upon law and
policy. (since employer and employee are regarded as associated parties in the business in which both are
engaged i.e. Partnership.) The third party can sue the employer and employee jointly and severally.

Reasons why does the law hold the employer liable for delicts of his employee are that;

(i). By instructing employees to engage in activities he creates the risk that the employees may cause
harm to others. (He also has the capacity to control his worker’s activities)

(ii). The employer operates his business through his employees and makes profits.

(iii ). The employer is usually in a far better financial position to compensate the injured party than
the financial resources to pay compensation and it is therefore unfair to expect the employee to pay
compensation for a delict arising out of performing work on behalf of the employer.

(iv). The employer which is often a sizeable enterprise rather than a single individual can far better
absorb loses of this description by taking up insurance or passing the burden of loss to the customers by
increasing prices (the employer can afford insurance whereas the employee often cannot.)

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(b).Explain four duties of the employee in an employment contract.(9)

The duties of an employee are governed by the terms of his contract. In the absence of any
express or implied terms his duties will be determined under common law. Contravention of
any of these duties may give an employer the right to dismiss the employee.

The following are the circumstances in which the courts together with other authorities such as
Christie (1998), Manase and Madhuku (1996), have held employees to have implied duties
towards their employers:

(a). To serve competently

The employee must exercise due care and skill in the performance of his duties. Where he
claims that he has the ability to do work undertaken, besides having the ability, he must also
perform the task diligently and efficiently.

An employee who is negligently can be sued for his negligence by his employer or by a third
party who suffers loss as a result.

(b). To provide personal service

The employee must not allow others outside the scope of his employer’s control to perform his
tasks.

In the case of Ilkiw Vs Samuels (1963), the facts were that, a lorry driver allowed another
person to drive his lorry. He did this against express instructions from his employer and without
enquiry as to other person’s ability to handle his vehicle. As a result, a third party was injured.

It was held that the employer was liable because of the negligence of his own driver who had
failed to provide personal service.

( c). To indemnify (compensate) his employer.

Where the employer suffers some loss because of his liability for the wrongful act of his
employee, the employee must be liable to indemnify his employer. The employer is only liable

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if the employee is acting in the course of his employment, it is not sufficient that the employee
committed the delict during his ordinary working hours if the employee does something which
is entirely for his own benefit and which does not form part of his duties as an employer will
not be liable for example, if Donald employed Esnath as a worker on a car assembling line and
during working hours Esnath steals a meat pie from Barkers Inn the employer will not be
vicariously liable.

( d). To serve in good faith

A contract of employment creates a fiduciary relationship between an employee and the

employer and the utmost good faith is required from the employee in his dealings with his
employer. He must contact himself to the employer in all honestness which also applies to the
conducting of his duties. This duty can be divided into five situations. This entails inter alia;

(i). Dealing faithfully and honestly when doing the assigned duties;

(ii). Not to compete business with the employer;

(iii). To advance the employer’s interest at all times;

(iv). Not to make any secrete profits that is, account for property and gain: An employee must
account for any money or property belonging to his employer, and any gains made thereon
during the course and scope of employment.

(v). Not to disclose confidential information to any third parties without the employers concern.

(c). Discuss four common law grounds permitting the employer to summarily terminate the
contract of employment. (9)

Summary Dismissal is instant cancellation of the contract without notice. The following are the
grounds which would justify instant dismissal according to ZIMBABWE LABOUR RELATIONS ACT
(Acts No. 16 of 1985 as amended through Act No. 20 of 1994) (Chap. 28:01).

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(i). If the employee is guilty of misconduct even outside the course of his duties

The employee must not misconduct himself. The term misconduct includes; Insolence,
persistent laziness, immorality, dishonest and drunkenness. Misconduct will justify summary
dismissal if it directly interferes with the business of the employer, or the employees’ ability to
perform his services.

In the case of Pepper Vs Webb (1969), a gardener who behaved in a surly manner, showed
disinterest in the garden, refused to perform certain tasks in the garden and was insolent to his
employer, was held to have been dismissed justifiably.

(ii). Disclosure of trade secrets/being dishonest in the scope of his duties e.g. fraudulent
behavior

The employee must maintain secrecy over his employer’s affairs during the time of his
employment. If the employer wishes to extend this beyond, the period of employment it would
be advisable to insert a suitable clause in the contract of employment.

The employee is under this obligation to his employers not to disclose confidential information
obtained by him in the course of, and as a result of his employment. This duty applies both
during employment and afterwards if the employee seeks to use such information to the
detriment of his employer.

Often an employer will wish to protect his trade secrets from disclosure by an employee when
the employee leaves his service, and not leave it to the employee’s common law duty of
fidelity. The employer will do this by including in the contract of employment a clause placing
some restrictions on future employment, i.e. a restraint of trade clause. When the employee
divulges the trade secrets to a third party then the employer has the power to summarily
dismiss the employee and also sue for lost business.

However, an employee may disclose information if it is such that it is in the public interest to
disclose it. Furthermore it should be disclosed to one who has a proper interest to relieve it.

(iii). If the employee wilfully disobeys a lawful order/insubordination.

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The employee must obey all lawful and justifiable orders given by his employer in the ordinary
course of business, but only undertakes to perform those tasks to which he has agreed in his
contract of employment. An employer may not require him to do other tasks, however,
reasonable, unless the contract is wide enough to permit this. This applies to both the nature of
the work and to the location.

In the case of Obrien Vs Associated Fire Alarms an employee in a Liverpool factory was required
to work in Barrow. It was held that such a request was outside the scope of the contract.

If the employee wilfully disobeys a lawful order or becomes insubordinate then the employer is
justified in dismissing the employee without notice.

However, in some circumstances an employee will be justified in refusing a task, even though it
is in the contract of employment.

As happened in the case of Ottoman Bank Vs Chakarian, Chakarian refused to move to a branch
of the bank situated in a country in which his life would have been in danger. It was held that
his refusal was justified. The duty of obedience is mitigated where employee does not show a
wilful flouting of the potential conditions of the contract.

(iv). Serious negligence when performing duties.

The employee must exercise due care and skill in the performance of his duties. Where he
claims that he has the ability to do work undertaken, besides having the ability, he must also
perform the task diligently and efficiently.

An employee who is negligently can be sued for his negligence by his employer or by a third
party who suffers loss as a result.

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REFERENCES

(i). Bampton, L & Drury, D. (1994) Introduction to Zimbabwean Business Law.

Harare: Legal Resources Foundation

(ii). Christie R.H. (1998) Business Law in Zimbabwe

Butterworth, Johannersburg, South Africa.

(iii).Gibson, J.T.R. (1988) South African Mercantile and Company Law. 6th
Edition, Juta and Co, Ltd, Cape Town

(iv).Havenga P, Havenga M,Van Der Linde K, and Van Kerken E(1992) General Principles

of Commercial Law

Juta & Co Ltd Johannesburg

(v). Manase A J and Madhuku (1996). A handbook on Commercial Law in Zimbabwe,

Harare, University of Zimbabwe.

(vi). ZIMBABWE LABOUR RELATIONS ACT (Acts No. 16 of 1985 as amended through Act No. 20
of 1994) (Chap. 28:01).

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