INSTITUTE OF CHARTERED SECRETARIES AND

ADMINISTRATORS IN ZIMBABWE

SUGGESTED SOLUTIONS: NOVEMBER 2020

BUSINESS LAW
QUESTION 1

(a) An offer is an act on the part of one person whereby he gives to another the legal power of
creating the obligation called contract. An acceptance is the exercise of the power
conferred by the offer, by the performance of some other act or acts.
Both offer and acceptance must be acts expressing assent. Generally speaking, acceptance
occurs when the offeree expressly accepts the offer made by the offeror. Once
valid acceptance takes place a binding contract is formed. It is therefore important to know
what constitutes a valid acceptance in order to establish if the parties are bound by the
agreement. There are three main rules relating to acceptance:
1. The acceptance must be communicated to the offeree.
2. The terms of the acceptance must exactly match the terms of the offer.
3. The agreement must be certain.

(b) Contract term is any provision forming part of a contract.

A representation is a statement of fact which does not amount to a term of the contract but
it is one that the maker of the statement does not guarantee its truth. This gives rise to no
contractual obligation but may amount to a delict, for example misrepresentation.
A representation is a statement of fact that induces a party to enter into the contract. The
statement, made before or at the time of making the contract, regards a past fact or
existing circumstance related to the contract which influences such party to enter
the contract.

(c) Judicial precedent is the source of law where past decisions create law for judges to refer
back to for guidance in future cases. Precedent is based upon the principle of stare decisis
et non quieta movere, more commonly referred to as ‘stare decisis’, meaning to “stand by
decided matters”. A binding precedent is where previous decisions must be followed. This
can sometimes lead to unjust decisions. A binding precedent is created when the facts of a
latter case are sufficiently similar to the facts of a previous case. The doctrine of precedent
is often referred to as being a rigid doctrine. Within the court hierarchy, every court is
bound to previous decisions made by courts higher than them.

(d) Summary of the lessor’s duties

1) To deliver the property which is the subject matter of the lease to the tenant at the time
agreed upon;
2) Not to interfere with the tenant’s use of the property and to protect him from
interference by others;
3) To maintain the property in a proper condition in order that the tenant may have proper
use for it;
4) To compensate the tenant for damages caused as a result of material defects in the
property;
5) To abide by such special terms of the lease as there may be.

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 Duties of the tenant:
1) To pay rent as agreed.
2) Not to use the property for any other purpose than that for which it was let.
3) To ensure that the property is not misused.
4) To return the property undamaged at the end of the lease.
5) To abide by such special terms of the lease as there maybe.

QUESTION 2

(a) The actio redhibitoria is available if the purchaser can prove that a reasonable person would
not have bought the article had she been aware of the defects. Where more than one
article has been bought and one is affected by a serious defect, there must be restitution of
not only the single article but of all the articles, provided that it is apparent that it was the
intention to sell the articles as a unit, and the purchaser can prove that a reasonable person
would not have bought it had she been aware of the defect in the article. If this is not the
case, there can be restitution of no more than the single article. The purchaser may set the
contract aside and claim restitutio inintegrum under the actio redhibitoria. This means that
the seller must repay the purchase price with interest and compensate for all reasonable
expenses incurred in connection with the thing from the time of its receipt. For her part, the
purchaser must return the thing, unless it has been destroyed through no fault of her own.
If it is her own fault that the thing has been destroyed or materially damaged, the action is
not available.
Where the purchaser has alienated the thing, there can be no rescission if the intention to
waive her right of rescission can be deduced from her conduct. ii) Actio quanti minoris: The
actio quanti minoris is intended for less serious cases, like whereas reasonable person
would still have bought the thing, but would merely have paid less for it had she been
aware of the defect. It is also available when the actio redhibitoria cannot be instituted
because the purchaser has neglected the article, or because she has waived her right to
resile. In the case of the actio quanti minoris, reduction in price is claimed in terms of the
agreement. The amount which may be recovered is the difference in value between the
purchase price and the true value of the defective article.

(b) Termination of Agency

Agency, being a contract, terminates much in the same way as any other contracts. The
following are some of the ways in which a contract of agency may be terminated.
1) Performance
When the agent has duly completed his mandate and received his commission, the
contract will come to an end and the parties will accordingly be released from their
obligations.

2) Time Limit

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 If the contract is for a stipulated time and that time runs out, then the contract will be
terminated.

3) Incapacity
Where the agent is no longer able to execute his duties, the contract will come to an
end. Incapacity can either be physical or legal e.g. insanity.

4) Impossibility
If the performance of the contract becomes impossible or illegal, then the contract will
come to an end.

5) Agreement
Since the parties enter into the contract of agency by agreement, they are also free to
agree to terminate the contract.

6) Renunciation by Agent
An agent who unilaterally renounces his mandate will thereby terminate the contract of
agency.

7) Renunciation by principal
If the principal, also unilaterally renounces the contract, the contract will be terminated.

QUESTION 3

An oral contract is a type of business contract that is outlined and agreed to via spoken
communication, but not written down. Although it can be difficult to prove the terms of an oral
contract in the event of a breach, this type of contract is legally binding. An oral contract is an
agreement that's spoken instead of written and it's legally binding. It's better to get a contract
in writing because if the parties disagree later over the terms of the deal, not having it in
writing creates problems for both parties involved.

For a verbal contract to be enforced by the court, involved parties each have to provide proof
of their version of how the deal was arranged. They also have to prove that there was a
meeting of the minds and the court case and discovery process can be extensive and expensive.

If an agreement is reached verbally, the deal can still be put into written form to formalize the
contract. Putting it in writing clarifies the terms of the deal and it completely gets rid of some of
the potential problems that can arise later. Oral contracts are generally considered as valid as
written contracts, although this depends on the jurisdiction and, often, the type of contract. In
some jurisdictions, some types of contracts must be written to be considered legally binding.

A written contract is an agreement made on a printed document that has been signed by both

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the parties. Written contracts are legally binding and easier to enforce than oral contracts.

The parol evidence rule governs the extent to which parties to a case may introduce into
court evidence of a prior or contemporaneous agreement in order to modify, explain, or
supplement a written contract at issue.

When two parties agree to form a contract together, their primary goal is to try to write down
the terms of their agreement in a very detailed way. The reason for this is so that when they
formally draft their official contract, it will include enough details that will hopefully help them
to avoid a contract dispute from occurring in the future.

There are some cases, however, where later on one of the parties may feel that not all of their
terms were added into the agreement. That same party might want to incorporate the terms
they think are missing into the final written document. To do so, they may try to introduce
evidence of prior oral agreements they had with the other party before the terms of the
existing contract were ever put into writing.

This is the point where the parol evidence rule comes into play. The purpose of the parol
evidence rule is to prevent a party from introducing the evidence of the prior oral agreements
that occurred either before or while the agreement was being reduced to its final form.

The party who wants to include what they believe are the missing terms and will alter the
existing contract will attempt to do this by saying parts of the oral agreement were left out. The
parol evidence rule prevents this scenario from happening.

QUESTION 4

(a) An undisclosed principal generally refers to a principal person whose existence is unknown
to the third party with whom the agent deals and so, in the eyes of the third party, the
agent is the principal. Common law doctrine on undisclosed principals confers rights and
imposes liabilities on the undisclosed principal, notwithstanding that he is not made a party
to the relevant contract. This doctrine is an exception to the general rule that only a party
to a contract may sue and be sued thereon. The rules under this particular doctrine may be
illustrated by considering the respective relationships between the principal and the agent,
the principal and the third party, and the agent and the third party.

(b) When a property is sold when it has a tenant in occupation, the questions often raised are:
“What happens to the tenant if the landlord sells the property?”, and what rights the tenant
will have with regards to cancelling the lease or enforcing it. In typical situations the lease
has precedence over the sale and the clause “huur gaat voor koop” is in force, which means
that the lease takes precedence over the sale of the property and the tenant has a right to
remain for the full duration of that lease.

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 The conditions of the existing lease do not fall away, and if it has not been cancelled both
the tenant and the new landlord are bound by these until such time that the lease is
renegotiated or expires. What needs to be done, however, is that the deposit held by the
previous landlord must be transferred to the new owner, and the same rule would apply as
with the previous landlord, that he must hold the deposit in an interest bearing account in
favour of the tenant, to be refunded to the tenant with interest when he moves out.

On the other hand, if the tenant decides he would no longer like to live on the property if
there is a new landlord, the conditions of the lease could also prevent him from leaving the
new landlord in the lurch and cancelling the lease.

If for any reason, whether on the landlord or tenant’s part, the lease is to be cancelled once
the property is taken over by the new owner, it must be by mutual consent and the first
course of action is to have open communication between the two parties so that an
agreement can be reached without either party put at risk financially.

QUESTION 5

The separate legal personality of a company means that:

1. Shareholders have limited liability;
2. Property and assets of a company belong to the company;
3. Profits belong to the company;
4. Debts and liabilities of the company belong to the company;
5. Shareholders have no right to manage the business or enter into transactions on behalf of
the company
6. A company may enter into contracts with its shareholders because it’s a person separate
from its shareholders;
7. A company may sue or be sued in its own name;
8. A company enjoys perpetual succession.

QUESTION 6

(a) A mortgage is a loan from a bank or other financial institution that helps a borrower
purchase a home. The collateral for the mortgage is the home itself, meaning that if the
borrower doesn’t make monthly payments to the lender and defaults on the loan, the bank
can sell the home and recoup its money. Mortgages allow a much broader group of citizens
the chance to own real estate, as the entire purchase price of the house doesn't have to be
provided up front. But because the lender actually holds the title for as long as the
mortgage is in effect, it has the right to foreclose one the home (seize it from the
homeowner, and sell it on the open market) if the borrower can't make the payments.

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(b) According to the Hire Purchase Act [Chapter 14.09], a hire purchase agreement is an
instalment sale agreement wherein goods are sold subject to the condition that,
notwithstanding delivery of the goods, the ownership shall not pass except in terms of the
agreement and the purchase price is paid in two or more instalments. Section 3 (1) (b) (a) of
the Hire Purchase Act [Chapter 14:09] defines a hire purchase agreement as “an agreement
wherein goods are sold subject to the condition that, notwithstanding delivery of the goods,
the ownership shall not pass except in terms of the agreement and the purchase price is
paid in two or more installments. Section 3 (1) (c) of the same Act provides that ownership
in the goods possess to the purchaser either before or upon delivery.

“End of Suggested Solutions”

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