MIDLANDS STATE UNIVERSITY

FACULTY OF LAW

NAME: RUSSELL PAGIWA

REGISTRATION NUMBER: R1917606 J

MODULE: COMMERCIAL LAW (LB 204)

LEVEL: 2:1

ASSIGNMENT QUESTION: Legal advice to NESCO PVT LTD to guide them on

some litigations they are facing.

DUE DATE: 18 /03/2021

QUESTION. You have been engaged as a legal advisor by NESCO PVT LTD
to guide them on some litigations they are facing:

a. They sold 5 beasts from their farm which died 3 days after delivery at the
abbatour from suspected contaminated water infection.

b. They sold goods with terms ex works, risk passing on delivery, duly placed the
goods on the dispatch bay but the container broke while the customer was loading
breaking all the goods.

c. A customer paid them using cheque which later proved to have been stolen from
a third part by the customer. The true owner now arguing that the cheque should not be
honoured.

d. Their accountant approved a discount of 30 percent for a customer purchase

without management approval. The company seeks to rescind such approval.

Advise NESCO PVT LTD on each of these issues [20 marks]

a. Advise in regards to the sold 5 beats from NESCO PVT LTD farm hereinafter
referred to as the ‘company’, which later succumbed to death 3 days after delivery at
the customer’s abbatour from suspected contaminated water infection. The company
executive should take note that, the general presumption under the law of sale is that, it
is the duty of the seller to guarantee against defects. These defects come in two forms
which are latent and patent defects were patent defects are those that can be easily
observed at the time of delivery by mere inspection and latent defects are those defects
that are hidden and not readily discernible at the time of delivery. In light of these said
defects vis-a-veer the circumstances to which the company faced. It goes without any
doubt to suggest that, the circumstances at hand amounts to a latent defect to which
defects inform of death of 5 beasts were noticed 3 days after delivery. The general
presumption under such circumstances is that, such a defect constitute a breach even if
the seller is unware of it. However it has to be noted that, the company was supposed to
contract out of liability by inserting a clause that the goods were sold ‘voetstoots’, not
fraudulently then under such circumstances buyer was going to be bound thus clearing
liability from the company.

It is important to note that, a clause ‘voetstoots’ under a contract of sale does not apply
under fraudulently circumstances by the seller and if they are applied as such they
amount to a breach of contract. This position can clearly be traced in the case of Hadley
v Savory 1916.1 A colt was sold voetstoots at a public auction. To the knowledge of the
seller the colt had previously run into a wire fence and seriously injured his shoulders,
so much that he went lame after trotting twenty paces. He was thoroughly unfit for
racing purposes. Of these facts not a word was said at the sale. It was held that the colt
was latently defective and despite the purported voetstoots clause, the buyer was
entitled to cancel the contract.

The company is further advise that, under these circumstances the company is said to
have breach the contract of sale in question the buyer of the 5 beats. However the
company has to be aware that, under the law of sale there are two aedilition remedies
which are available for both the customer for breach of a contract through a latent
defect which are action redhibitoria or action quanti minoris. Under the given
circumstances here, the customer might institute litigation and sue for aedilition
remedies under action redhibitoria seeking cancellation of the contract or restitution of
the merx. The extent of the defect is similar to the position held in the case of Dibley v
Furter 1951.2 In this case the court held that,
‘I am of the opinion that redhibitory defects are those which either destroy or
impair the usefulness of the thing sold for the purpose for which it was sold and
for which it is commonly used, that the defect must be material and that the test
whether the defect has destroyed or impaired the usefulness of the thing sold is an
objective one, ie that the defect has destroyed or impaired it for everyone and not
1
Hadley v Savory 1916 TPD 385
2
Dibley v Furter 1951 (4) SA 73
just for the particular purchaser and lastly that the defect must attach to the thing
sold.’.
It therefore follows that, where a defect has been proved to be so material, a buyer can
cancel the contract and claim a refund of the purchase price.

b. Advice to the company with regards to the container which broke whilst the
customer was loading breaking all the goods inside the container. It is also important to
note that, the goods which were in this container were termed ex works which means
risk passing on delivery. At law it is common cause that, goods termed exworks is a
short agreement which maximizes the buyer's risk and responsibility, by requiring the
seller to only make the goods available for the buyer at their warehouse or dock. Once
the buyer collects the goods, the buyer assumes all other responsibilities, including
transport to the final destination. Put differently under the law of sale, risk generally
passes to the purchaser when the contract of sale is concluded. This position can
clearly traced from a South Africa case of Isando Foods (Pty) Ltd Fedgen Insurance Co
Ltd. Nugent AJA (as he then was) stated:
“Generally, when property is sold the risk that the property might be damaged
passes to the purchaser once the sale is perfected even though delivery has not
yet taken place...”3
Given this information it therefore follows that, at law the company is not liable for an
remedies which the customer might ever think of since the goods were termed ex works
and the customer cannot plead supervening impossibility.

c. Advice on the matter where a customer to the company paid for goods
purchased using a cheque proved to have been stolen from a third part by the
customer. Later the true owner of the cheque is now arguing that the cheque should not
be honoured under such circumstances. The general rule of law applicable under the
use of cheques is that, where payment of the pretium is by way of a cheque, ownership
does not pass until the cheque is honoured. This is also supported by section 23 of the

3
Isando Foods (Pty) Ltd Fedgen Insurance Co Ltd
Bills of Exchange Act [Chapter 14:02], wherein it is clearly stated that, where a
signature on a bill is forged or placed thereon without the authority of the person whose
signature it purports to be, the forged or unauthorized signature is wholly inoperative
and no right to retain the bill or to give a discharge therefor, or to enforce payment
thereof against any party thereto, can be acquired through or under that signature. 4 It
should also come to the light of the company that, a dishonoured cheque typically
becomes a criminal matter when the person who wrote it did so with the intention to
commit fraud contrary to section 136 of the Criminal Law Codification and Reform Act
[Chapter 9:23].5

d. Advice on the issue were the company accountant approved a discount of 30%
for a customer who purchased goods without management and the company seeks to
withdraw the said discount. Basically as a point of departure, it has to be noted that,
under the law of agency, commercial agency is involved with the performance of a
service by an agent on behalf of the principal. These agencies acts as such under
authority from their principals. Authority maybe “express authority”, which arises where
the mandate is clearly spelt out in the document of authority, the other type of authority
may be implied. This type of authority exists where there is no express it is authority by
conduct in circumstances were the dictates of common sense lead to no other
conclusion than the existence of authority and the last authority is authority by estoppel
it arises where there is no authority (no authority by implication or expression but there
is authority.

Having explained about all the possible types of authorities which an agent can possess
working on behalf of his or her principal, it goes without any doubt that the
circumstances under discussion clearly point outs the fact that the accountant did the
action he did as working as agent of the company. This is so because, a reasonable
court acting carefully would deduce the conduct of the accountant as better placed to
have acted exercising implied authority under the circumstances. The conduct of the
accountant of offering discount to the customer genuinely points to authority by
4
Bills of Exchange Act [Chapter 14:02],
5
Criminal Law Codification and Reform Act [Chapter 9:23]..
implication. In furtherance, the company’s wish to withdraw the discount as was
instructed by the accountant does not follow at law because the action by the
accountant (as an agent of the company) is deemed to be binding and final at law to
both the company and the customer.

This position can clearly be traced in the case of Gwafa v Small Enterprises
Development Corporation & Anor 1999. 6 It was held that,
“.. that if a principal employs an agent in a certain capacity, and it is generally
recognised that an agent employed in that capacity has authority to do certain
acts, then any of those acts performed by the agent will bind the principal because
they are within the scope of his “apparent” authority..”
Having said this it therefore follows that. The accountant acted as an agent of the
company thus the company is bind by the action done by the accountant and cannot
withdraw the discounted offered by the accountant to the customer even though the
company management alleges that they were not consulted when that decision was
made.

6
Gwafa v. Small Enterprises Development Corporation & Anor 1999 (2) ZLR 261 (SC).
BIBLIOGRAPHY
1. Bills of Exchange Act [Chapter 14:02]
2. Criminal Law Codification and Reform Act [Chapter 9:23]
3. Hadley v Savory 1916 TPD 385

4. Dibley v Furter 1951 (4) SA 73

5. Isando Foods (Pty) Ltd Fedgen Insurance Co Ltd

6. Gwafa v. Small Enterprises Development Corporation & Anor 1999 (2) ZLR 261
(SC)