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Part 2 Examination Paper 2.2(ZWE)Corporate and Business Law (Zimbabwe) December 2002 Answers

1 Legislation, which is frequently referred to as Statute Law is the most important source of law in many of the worlds jurisdictionsincluding Zimbabwe. In terms of the Constitution of Zimbabwe legislative power of the Republic is vested in the Parliament of Zimbabwe and the President.

There are two main forms of legislation, Acts of Parliament and delegated legislation.

Delegated legislation is passed by bodies to whom Parliament has delegated authority. Although statutes of Parliament are theprimary source of legislation, other types of legislation (delegated legislation) are promulgated by bodies and persons empoweredto do so. Examples of such forms of legislation are:

(a) Proclamations by the State President in terms of the Constitution.

(b) Ordinances, regulations and statutory instruments by Government Ministers in charge of state departments in terms of therelevant empowering statutes.

(c) Bye-laws of the various municipalities and rural district councils throughout the country.

(d) Rules and regulations by statutory bodies such as the Health Professions Council, The Traffic Safety Council etc.

Sometimes legislation may be needed so urgently that the legislature can act very quickly (fast tracking) to enact the requisitelegislation. But usually the legislative process goes through a lengthy and protracted procedure. The legislative phases can bebroken down as follows:

(a) First Reading of the bill which is a mere formality.

(b) Second Reading this is the most important stage in the introduction of most bills and the main principles of the Bill arediscussed at this stage.

(c) Committee Stage this gives members of Parliament an opportunity to discuss the Bill clause by clause and improve thewording and make amendments where necessary.

(d) Report Stage if any amendments have been made at the previous stage they will be debated and considered by the Houseand further amendments can still be made.

(e) Third Reading finally a bill is given a formal third reading and goes to the President for his approval and when the Presidentsigns a Bill it becomes an Act of Parliament and part of the law. To inform everybody what the new law is, it will be publishedin the Government Gazette (constructive notice).

Some of the well-known (if not controversial in some cases) pieces of legislation that have been enacted by Parliament in the lasttwelve months include:

(1) The Public Order and Security Act No. 1 of 2002

(2) The Sexual Offences Act No. 8 of 2001 and

(3) The Access to Information and Protection of Privacy Act No. 5 of 2002

Both the High Court and the Supreme Court have got the power to set aside legislation which is ultra vires the Constitution, forexample where legislation purports to derogate from rights enshrined under Chapter Three of the Declaration of Rights in theConstitution. This is because our Declaration of Rights is justiciable (can be vindicated in a court of law).

As for delegated legislation, there are many factors/reasons which justify its existence. Briefly some of the reasons are:

1. Pressure on Parliamentary time the Parliamentary calendar is very congested and there is no time to debate in detail all the

matters which require legislation in the country;2. Flexibility and adaptability-delegated legislation can easily be adapted to suit a change in circumstances.

3. Certain matters such as tax law, medical and engineering matters require unique expertise in terms of the legislative agendaof the Government and the details are then worked out by the experts and technocrats who are employed by the relevantgovernment ministries, departments and statutory bodies.

4. In an emergency there may be insufficient time to resort to the laborious processes of Parliament; statutory instruments andproclamations can be brought into force much more quickly and expeditiously than statutes.

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The major criticism that is often made against delegated legislation is that it is undemocratic if not unconstitutional, in thatimportant rules and regulations are made without recourse to the properly elected authority, Parliament. However, such criticismcan be rebutted by the following factors:

1. Parliament still ultimately retains some control over delegated legislation. Statutory instruments are vetted by Parliament.

2. In our jurisdiction the superior courts (the High Court and Supreme Court) have control over delegated legislation andnormally the validity of a statutory instrument can be challenged on two grounds namely:

(i) if the Statutory Instrument is ultra vires (outside the scope) the parent legislation(ii) if the correct procedures were not followed in making the statutory instrument.

In all it can be said that it is quite clear that legislation is the most important and authoritative source of law in our jurisdiction andthe most common way by which legislation is terminated is through repealing.

2 A valid contract gives rise to rights, obligations and powers that are vested in one or both of the parties to the contract. Theserights always include a personal right to claim performance from the other party. If the latter does not perform in terms of thecontract, he may face a claim based on breach of contract. The parties however must achieve consensus ad idem (meeting of minds) before a contract can come about. Where a party understood something incorrectly it is said that he acted as a result of mistake and in cases of mistake one cannot be said to have consented to that which the other party has in mind. There is thereforeno consensus between the parties and likewise no contract. In cases involving duress, undue influence and misrepresentation,consensus will have been obtained improperly and therefore it would be defective. Such a contract would be voidable at theinstance of the weaker party.

From the foregoing it is clear that there are factors which may influence consensus between the parties to the extent that thecontract may be rendered void and voidable.

These factors which will be discussed in detail below are the following:

1. Mistake (error)2. Misrepresentation3. Duress4. Undue Influence

1. Mistake

Error or mistake is one of the greatest defects that can occur in a contract, for agreements can only be formed by the consent

of the parties and there can be no consent where the parties are in error in relation to the object of their agreement. Mistakecan be described as a misunderstanding or misapprehension by one or both of the parties regarding facts, events orcircumstances in the contract. The rule is that a mistake renders the contract void if it is:

(a) one of fact rather than law

(b) essential (material)

(c) reasonable ( justus error )

This mistake (error) must concern only the facts of the contract and in particular the essential facts of the agreement in orderto have any influence on the consensus between the parties.

In Maritz v Pratley (1894) items were displayed for auction each bearing a number for identification. Prospective purchaserswere requested to inspect the goods which were to be put up for auction. A mirror was displayed on a marble table andPratley made a bid on the table thinking that the mirror formed part of the table. He refused to pay separately for the mirrorand was sued by the auctioneer for the purchase price. The court ruled that there had been a mistake (error) regarding afact material to the contract and consequently that no consensus had been reached and the contract was therefore void.

The fact that the error is essential and therefore that there is dissensus between the parties is not sufficient on its own torender the contract void. In addition the mistake must be a justus error (reasonable mistake). An error is justus when it isreasonable or excusable in all the circumstances of a particular case. This means that the mistake (error) must not be dueto the negligence of the party who relies on mistake in order to avoid liability.

In George v Fairmead (1958). A guest at an hotel signed the register without acquainting himself with a clause whichindemnified the hotel from claims arising from theft. George maintained that his action was a case of mistake but the courtdecided that it was not a reasonable mistake and therefore had no effect on the contract.

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2. Misrepresentation

A contract can be set aside by the aggrieved party on the ground of misrepresentation where:

(a) A representation was made by one party or his agent to the other in order to induce him to enter into the contract.

(b) The representation was material

(c) It was false in fact

(d) The other party entered into the contract on the faith of the representation.A party cannot claim misrepresentation unless he has been induced thereby to conclude the contract. He must thereforeprove that he accepted the represented facts as being true and that they constituted a reason for him to conclude the contractbefore he will be able to contest the contract. The test which is applied is whether the innocent party would have concludedthe contract if the misrepresentation had not been made.

In Poole and McLennan v Nourse (1918) a misrepresentation was made concerning the qualities of a farm. However beforethe purchaser bought the farm they were acquainted with the true facts and they nevertheless decided to go ahead andpurchase the farm. The court decided that they had not been induced to purchase the farm by the misrepresentation andtherefore the contract could not be rescinded.

The choice between the enforcement and setting aside of the contract must be made by the innocent party within a reasonabletime after knowledge of the deception. He has a choice between enforcing or rescinding the contract and once he has chosen,he is bound by his choice and he loses the alternative option. ( Bowditch v Peel and Magill (1921).

In our law a distinction is drawn between fraudulent/intentional, innocent and negligent misrepresentation. The party allegingthat a misrepresentation is fraudulent has to prove the absence of honest belief by showing in the words of Lord Herschell inDerry v Peek (1889) that a false representation has been made.

(1) knowingly or(2) without belief in its true or(3) recklessly careless whether it be true or false.

The person to whom the fraudulent misrepresentation was made has the choice of the following remedies.

(a) He may ignore the contract and if sued on it use the fraud as a defence.(b) He may rescind the contract and claim restitution Dibley v Furter (1951)(c) He may claim rescission of the contract, restitution and damages Gous v De Kock (1887)(d) He may treat the contract as binding and claim damages for any loss he has suffered.

Coomers Motor Spares (Pvt) Ltd v Albania (1979)3. Simple/Innocent Misrepresentation

A misrepresentation made without fraud and without negligence is a simple misrepresentation. The party making themisrepresentation genuinely believes the facts to be true while they are actually false.

The only remedy available in circumstances involving innocent misrepresentation is rescission and damages are not available.The remedy of rescission is available to all the three forms of misrepresentation.

Rescission means that the parties have to be restored to the status quo ante . The innocent party is entitled to claim backwhatever he has parted with as a result of the contract but he is also obliged to return what he has taken from the other party.Harper v Webster (1956)

Negligent misrepresentation occurs where the maker of a misrepresentation fails to display that degree of care which areasonable man in his position would display. He is negligent if he should have verified the truth of the facts before conveyingthem to the other contracting party.

Whilst the remedy of rescission is available for negligent misrepresentation for many years it was a debatable point as towhether damages were available for negligent misrepresentation in Zimbabwean law. It is now settled law that in appropriatecases damages are available for negligent misrepresentation. Autorama (Pvt) Ltd v Farm Equipment Auctions (1984).

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4. Duress

Duress may be described as a threat or intimidation which engenders fear in a person, causing him to conclude a contractas a result of this fear. In order to succeed voiding the contract the fear to which the threat gives rise must be reasonablefear, in other words it must be clear that a reasonable person would also have been fearful in the given circumstances. Theinnocent party must have been threatened by the other contracting party and not by an outsider.

In our law the leading case on this subject is Broodryk v Smuts (1942) where Broodryk was threatened with internment orarrest if he were to refuse to enlist with the defence force.

The requirements for duress were set out in this case and are the following:

(a) the fear must be reasonable(b) the fear must be caused by a threat of considerable evil and directed at the contracting party or his family or property(c) it must be a threat of immediate danger which cannot be averted(d) the threat or intimidation must be contra bones mores (contrary to good morals)(e) the moral pressure which is exerted must cause damage.

Duress renders the contract voidable at the option of the threatened person and he has the choice between enforcing andsetting aside the contract, as well as the right to claim damages.

5. Undue Influence

Undue influence and the consequences thereof were described by Fagan JA in Preller and Others v Jordaan (1956).

As the influence which one person has over another which weakens the latters resistance and renders his resolve pliable sothat the other person may exercise his influence in an unconscionable manner to persuade the victim to conclude a prejudicialcontract which he would normally not have concluded. Once again because the weaker partys consent has been improperlyobtained the contract is consequently voidable at the instance of the person who has suffered.

The requirements for undue influence are as follows:

(a) one party obtains influence over the other party(b) this influence weakens the other partys resistence and renders his resolve malleable(c) the party exerting the influence uses this influence in an unscrupulous manner(d) this influence leads to the conclusion of a contract which is to the detriment of the other party. Patel v Grobbelaar (1974)

3 Agency is a contract whereby one person, the agent concludes a juristic act for and on behalf of another who is called the principal

with the result that a legal tie arises between the principal and a third party.The activities of an agent are thus concerned with the formation, variation or termination of contractual obligations. The essentialcharacteristics of a contract of agency are as follows:

(a) one person acts on behalf of another(b) this act on behalf of another person is a juristic act(c) the act is authorised(d) the act results in a legal tie between two parties one of which was not involved in the original action.

There are various ways through which the authority of an agent can be established, namely by means of agreement, by operationof law, estoppel and ratification. Although the juristic act is concluded between the agent and a third party, the legal bond existsbetween the principal and the third party. The agent does not acquire any rights or duties (except in very limited cases) and therights and duties exist between the principal and the third party.

Agency can be terminated in a variety of ways and some of them are as follows:(a) Performance of the transaction authorised. If for example the agent was given a mandate to find a specific property for the

principal the relationship is terminated when both sides have fulfilled all their obligations. The Castle Wine and BrandyCompany Ltd v Morris (1931)

(b) Expiry of fixed 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.However it is possible that the parties could expressly or impliedly renew the contract before it expires.

An example of implied renewal is to be found in the case of Fiat SA v Kolbe Motors (1975) in which Fiat SA appointed KolbeMotors in writing as its agent. The agreement in terms of which Kolbe was authorised to sell Fiats products (mostly motor vehiclesand spares) was for one year but was renewed annually, until the end of 1972 at which time it was not renewed. The contractstipulated that it would cease to exist if it was not renewed in writing. During 1973 Fiat proceeded to supply its product to Kolbeand Kolbe continued to sell it. At the end of 1973 Fiat unilaterally terminated the contract. Kolbe claimed that it was entitled to1 years notice of termination as was stipulated in the contract of agency. Fiat disputed this based on the fact that the contractwas not renewed at the end of 1972. The court ruled that the parties entered into a tacit agreement and that one could concludethat they included the provisions of the original contract in the tacitly concluded new contract

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(c) Death of the principal or his insanity or insolvency. Pheasant v Warne (1922)

(d) Death of the agent or his insanity. The death of the contracting party does not normally terminate a contract. The rights andobligations pass to the deceased estate which is represented by the executor, on the other hand, contracts of a personal naturesuch as marriage, agency or employment are however terminated by death. Ward v Barrett (1962)

(e) Revocation by the principal. Save for a few exceptions the principal may summarily revoke his agents authority to performa juristic act on his behalf provided that the act in question has not already been performed. For example if A employs B tofind a suitable purchaser to buy his house and authorises B to sell the house on his behalf. A may change his mind andrevoke the authority granted to B and B cannot thereafter bind A to a sale of the house. Of course, if A (the principal) hasbound himself by contract not to revoke the authority but nevertheless does so, he will be liable in damages for breach of contract. Ward v Barrett (1962)

(f) Renunciation by the agent. The agent may at any time but on just grounds renounce his authority. In the absence of such just grounds the agent will be liable in damages, to the principal.

(g) Supervening impossibility of performance. This refers to a situation whose performance was possible at the conclusion of the agreement but subsequently became impossible. The impossibility must be beyond the control of the parties due to vismajor or casus fortuitous (an act of God or an inevitable accident). In Peters, Flamman and Co. Ltd v Kokstad Municipality(1919)

The municipality had concluded a contract with the appellants in terms of which the latter were to supply electricity to the townfor a number of years. Before this period had expired, the appellants were interned as enemies of the state and their business waswound up under the relevant legislation.

The court decided that supervening impossibility had terminated the contract.

As soon as performance of a contract has become impossible because of supervening impossibility the contract is terminated andthe parties are freed of their obligations.

4 The majority rule position in relation to a companys governance is as captured by the Foss v Harbottle principle. The rule of lawknown as the Foss v Harbottle rule has resulted from the refusal of the court to interfere with the management of the company atthe instance of minority shareholders who for one reason or the other are dissatisfied with the conduct of the companys affairs bythe majority or by the board of directors. The Foss v Harbottle principle was first clearly articulated in 1843 in the case from whichit takes its name and it has since spawned an immense volume of case law and legal literature.

In practical business terms it is generally the directors who run the company and make business decisions but the general meetingof the company is the ultimate authority of the company. Major decisions regarding the structure and fate of the company suchas alterations in the memorandum or articles, increase and reductions of capital, change of name, variations of shareholders rights,disposal of the undertaking or major assets of the company, compromises, amalgamation and reconstructions and the voluntarywinding up of the company have to be taken or approved by the majority in many instances by way of special resolution.

The majority rule concept applies also where a wrong is done to the company. The rule is that where a wrong is done to thecompany, for example by its directors failing to fulfill their duties it is the company alone, through its majority that can sue for theinjury inflicted.

The proper plaintiff is thus the company itself. Individual members cannot sue even though their shares have fallen in valuebecause of the wrong done to the company. The power to decide whether to use in the companys name is usually delegated tothe directors by the articles but should they decline to sue a general meeting of the company may resolve that an action shall beinstituted.

In Foss v Harbottle (1943) an action was brought by two shareholders in a company on behalf of themselves and all othershareholders except the defendants who were the directors and promoters of the company to which they had sold the company atan undisclosed profit. The action was dismissed because the shareholders were not the proper plaintiffs. The company itself wasthe proper plaintiff unless the act complained of was ultra vires .

In the case of Edwards v Halliwell Jenkins L.J summarised the position in a very lucid manner and two of the propositions that heunderlined bear repeating. These are:

1. The proper plaintiff in an action in respect of a wrong alleged to be done to a company is prima facie the company itself.

2. Where the alleged wrong is a transaction which might be made binding on the company and on all its members by a simplemajority of the members, no individual member of the company is allowed to maintain an action in respect of that matterbecause if the majority confirms the transaction, the question falls away or if the majority challenges the transaction, there isno valid reason why the company should not sue.

In terms of the current law there are limitations which exist on the majority rule principle. In appropriate cases (where justice sodemands) the courts will depart from the majority rule principle.

There is no room for the operation of the rule if the alleged wrong is ultra vires the memorandum or articles of association of thecompany. This clearly seems to be the intention of the legislature despite the existence of section 10 of the Companies Act whichmodifies the operation of the ultra vires rule in Zimbabwean law. Section 10(2)(a) entitles a member to bring proceedings torestrain the company from making or entering into any transaction which exceeds its objects.

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There is also no room for the operation of the rule if the transactions complained of could be validly done or sanctioned only by aspecial resolution or the like because a simple majority cannot confirm a transaction which requires the concurrence of a greatermajority. There are many sections of the Act that require prescribed majorities, not a mere simple majority (For example s. 20,25, 75, 78, 242 etc). In certain cases, the authority of the courts is required. For example s.91 which relates to variation of rights attaching to shares and s.92 which makes reduction of share capital subject to both confirmation by the court and a specialresolution. One of the most important common law exceptions to the majority rule principle applies where what has been doneamounts to fraud and the wrongdoers themselves are the controlling majority. In that case the rule is relaxed in favour of theaggrieved minority who are allowed to bring a minority shareholders action on behalf of themselves and all others. The practical

reason for this is that if they were denied that right, their grievance would never reach the courts because the wrongdoersthemselves, being in control, would not allow the company to sue.

In Burland v Earle (1902) the court made the following observation (in part)

. . . where the persons against whom the relief is sought themselves hold and control the majority of the shares in thecompany and will not permit an action to be brought in the name of the company. In that case the courts allow theshareholders complaining to bring an action in their own names . . . .

5 A dividend is a share in the profits of a company. The manner in which profits are to be divided is determined by the articles of the company. The articles may provide for the declaration of dividends by the company in a general meeting with the right of directors to pay such interim dividends as are justified by the profits of the company or they may authorise the directors to declaredividends without reference to a general meeting.

Usually the articles prescribe that no dividend may be paid otherwise than out of profits. It is now settled law both in terms of thecommon law and statutory law that dividends may not be paid out of capital even if the memorandum or articles purport toauthorise payment because such payment would constitute an illegal or unauthorised reduction of capital. Article 116 of Table Aof the Companies Act Chapter 23.04 says no dividend shall be paid, otherwise than out of profits . . . .

Whilst the company in general meeting may declare dividends, no dividend shall exceed the amount recommended by the directors(Article 114, Table A). Thus, while the shareholders can vote to reduce the amount of the dividend, they cannot vote to increaseit.

The directors may before recommending any dividend set aside out of the profits of the company such sums as they think properas a reserve or reserves which shall, at the discretion of the directors be applicable for any purpose to which the profits of thecompany may be properly applied and pending such application, may, at their discretion either be employed in the business of thecompany or be invested in such investments, other than shares of the company as the directors may from time to time think fit.

In the case of Buenos Aires Great Southern Railway Company Ltd v Preston after incurring heavy losses on its trading account forseveral years, a company made profits in one year sufficient to pay the full dividends on preference shares. The directors howeverconsidered that it would be unwise to pay such dividends and decided to transfer the profits to reserve. The court held that theyhad power to do so and that the preference sharesholders were not entitled to claim their dividends.

Romer J made the following observation:

having regard to the articles it is clear that the dividends on the ordinary capital were payable only out of the net profit of thecompany in the sense that the powers of the company or the board to carry profits to reserve override the rights of theshareholders to dividend. The procedure would be that the board would consider the profits of the company on the one handand its requirements as to maintenance and so on, on the other. Having decided the amount of profit, if any, which wasavailable the directors would make the necessary recommendation to the company and the company would consider thematter . . . .

Whilst it is true to say that dividends are declared at the sole discretion of the directors and that shareholders cannot insist on thecompany declaring a dividend, once a dividend is declared a company becomes indebted to its shareholders in the amounts of their dividends. However such dividends are debts which bear no interest against the company. This is as a result of article 122of Table A which states that no dividend shall bear interest against the company. Whilst the legal position is that dividends mayonly be paid out of profits it is also clear that if the directors have, without negligence, formed the bona fide belief that the companyhas earned sufficient profits to pay a dividend when in fact it has not, no liability will accrue to them. On the other hand, if theywere negligent in declaring a dividend, they can be held liable.

Finally, the directors may deduct from any dividend payable to any member all sums of money, if any, presently payable by himto the company on account of calls or otherwise in relation to the shares of the company.

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6 (a) The insolvency of a debtor comes to an end when he is rehabilitated. Rehabilitation may take place by lapse of a prescribedperiod of time, but the debtor often asks the court to rehabilitate him before expiry of the prescribed period of time. Althoughhe still enjoys his personal freedom a declaration of insolvency imposes severe legal restrictions on the debtor. In terms of the Insolvency Act, Chapter 6:04 the administration of the insolvents estate is placed in the hands of a trustee and theinsolvent is deprived of the power to enter into significant contracts. He is disqualified from holding certain positions in termsof the Companies Act, Chapter 24:03. For example he may not be appointed as a director or liquidator of a company. Subjectto such conditions as the High Court may have imposed in granting a rehabilitation the rehabilitation of the insolvent personshall have the following legal effects:

(i) of putting an end to sequestration

(ii) of discharging all debts of the insolvent which were due or the cause of which had arisen, before the sequestration andwhich did not arise out of any fraud on his part and

(iii) of relieving the insolvent of every disability resulting from the sequestration

(b) Application to the court for rehabilitation of the insolvent person may be made in the following circumstances:

(i) an insolvent may immediately seek an order of rehabilitation if he has obtained a certificate from the Master of the HighCourt that creditors have accepted an offer of composition in which payment has been made, or security has been givenfor payment in terms of s.141 of the Insolvency Act.

(ii) If the insolvent has been convicted of a fraudulent act in relation to his existing or any previous insolvency and five yearshave elapsed from the date of his conviction in terms of s.141 (2)(c) of the Act.

(iii) If the insolvent has been sequestrated on a previous occasion and three years have elapsed from the confirmation of thetrustees first account in terms of s.141(2)(b) of the Insolvency Act.

(iv) If twelve months have elapsed since the confirmation of the trustees first account or two years from the finalsequestration order whichever is the earlier.

The insolvent must provide security for the payment of the costs of any opposition to the application for rehabilitation. Thepurpose of this provision is to encourage creditors and others to place before the court facts relevant to the application.(Ex parte Schoeman (1943).

The security must be furnished to the Registrar of the court not less than three weeks before the hearing of the application.The costs are paid to any person who may oppose the rehabilitation and is entitled to an award of costs by the High Court.The rehabilitation of the insolvent is a matter which rests within the discretion of the court. The court has to decide whetherthe insolvent is a fit person to be rehabilitated i.e. whether he should be allowed to trade with the public on the same basis

as any other honest man. (Ex parte Hittersay 1974)Whilst the rehabilitation of an insolvent is a matter which lies solely within the discretion of the court, this discretion must beexercised judicially and not arbitrarily.

7 (a) From our court cases it would appear that the employer is not legally bound to provide work for the employee. Provided thathe pays the employee the agreed remuneration the employer therefore does not commit breach of contract if he fails to providework for the employee to do.

An employer is however obliged to provide work under certain circumstances. In the following situations the employer hasa duty to provide work and should he fail to discharge it he would be committing breach of contract:

(i) where the amount of the remuneration is based on the amount of the work done in the case of someone doing piecework or a salesman who gets a commission for the work done.

(ii) where the failure to provide work brings about a reduction in the status of the employee ( Stewart Wrightson (Pvt) Ltd vThorpe 1974).

(iii) where the employer has undertaken to train the employee in a certain profession or trade. For example the case of anapprentice jockey who is professionally being trained to ride horses.

(iv) where a persons earning capacity is linked to the publicity which he receives from the work he does, for example anactor. This persons employer must provide him with work in order to ensure his professional success.

(v) where an employees career path or professional development is directly dependent upon his constant exposure to work(Muzondo v University of Zimbabwe 1982).

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(b) Payment of Wages

It is the employers most important obligation to pay the employee the agreed remuneration when the wages are due.

Where there is no agreement regarding the time of payment the common law prescribes that payment will take place at theend of the period of service. When the employee is working for an indeterminate period it is important that he be paid on aregular basis for example on a weekly, fortnightly or monthly basis. However reference will be made to trade usage in theparticular industry and area in order to determine the time for payment. It is trite that an employee will first render his servicesbefore receiving payment. Once the payment is overdue the employee has a right of action to recover the unpaid wages.(Brismas v Dardagan 1950)At common law the employee is entitled to full pay during suspension and if misconduct charges are confirmed and he isdismissed the dismissal cannot operate retrospectively.

On the death of the employer the employee is paid up to the end of his period of service, or where he was employed for anunspecified period, up to the date when the contract may validly be terminated. If the services are of a personal nature thecontract will be terminated by the death of the employer. The death of the employee terminates the contract of service.

The insolvency of the employer terminates the contract of service but the employee may institute a claim for damagessustained as a result of the termination.

8 One of the fundamental obligations of the seller is the duty to deliver property which is free from latent defects. This duty onlyrelates to defects which are material and an objective test is used to determine materiality. ( Dibley v Furter 1951).

A latent defect is one which would not be apparent upon a reasonable inspection by a prudent man even though it might notescape the notice of an expert.

In RomanDutch law, a buyer who inspects the property cannot be heard to complain of the patent defects which the inspectionshould have revealed. A seller who sells property voetstoots (as it stands) is protected from liability in the event that themerchandise turns out to be latently defective. However a voetstoots clause does not protect the seller from fraudulent non-disclosure of latent defects. Thus in the Zimbabwean case of Matambo v Chakauya (1992) the plaintiff purchased a housevoetstoots from the defendant. When the rainy season arrived it was discovered that there were bad leaks of water through theroof. The court ruled that the defect was a latent one and the defendant had deliberately not disclosed it at the time of theconclusion of the agreement of sale. As a result of the fraud the court ruled that the seller was not absolved of liability,notwithstanding the voetstoots clause.

Where the sale is not voetstoots and the buyer discovers that the merchandise is latently defective he is entitled to claim one of the Aedilition remedies, namely the Actio Redhibitoria (action for rescission of the contract) and the Actio quanti minoris (reductionof purchase price). The Actio Redhibitoria is an action for cancellation of the contract because the defect is so serious as to makethe property unfit for the purposes intended by the contract.

The rationale underlying this remedy is that if the purchaser had known of the defect prior to the conclusion of the agreement of sale he would not have bought the article when he did. The defect is so fundamental that it makes the merchandise unsuitablefor the purpose for which it was bought. By instituting this action, he cancels the contract. He thus claims the return of thepurchase price, interest, repayment of all expenses with regards to the delivery and preservation of the article and reimbursementof improvements effected by him.

The purchaser must however return the article together with anything that has accrued to it.

Before the purchaser can hold the seller liable for latent defects he will have to prove that:

(1) the defect existed at the time of the conclusion of the contract(2) the defect is in fact latent i.e it could not readily have been noticed(3) the purchaser was unaware of the defect at the conclusion of the contract and that(4) the defect is material in that it renders the merx useless or less useful for the purpose for which it was bought.

Some examples of latent defects in the merchandise are:

(a) lung sickness in cattle ( Haviside v Jordan (1903)

(b) heartwater disease in sheep ( Ackermann v Komfass (1904)

(c) a welded crankshaft in a motor vehicle ( Goldblatt v Sweeney (1918)

(d) a leaking roof ( Matambo v Chakauya (1992)

Under the Actio Redhibitoria , it is a condition precedent that the purchaser should restore the article plus any fruits and accessoriesto the seller if he wants to recover the purchase price and his interest back. The purchaser forfeits the right to the remedy of redhibitoria in the following situations:

(a) if the article is not capable of redelivery to the seller;(b) if the article has been materially damaged because of the purchasers negligence or by a person for whom he is responsible;(c) where the purchaser by exercising unequivocal acts of ownership over the article has delayed to such an extent as to amount

to a waiver;(d) where the defect is of a trivial nature.

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On the other hand, if the merx has perished due to the very defect complained of and in the absence of fault on the part of thepurchaser he will still be entitled to recover the purchase price despite the fact that the merchandise would be incapable of redelivery to the seller.

In Dodd v Spitaleri (1949) the purchaser bought a horse which was suffering from a severe bone disease. There was conclusiveveterinary evidence that the disease was incurable and to save it from any further pain the purchaser had the horse shot. Thecourt ruled that the purchaser could recover his purchase price despite the fact that he was unable to return the horse.

And in the case of Marks v Laughton (1932) the buyer sought to rescind the sale of eggs which had been condemned as unfit forhuman consumption and as a consequence had already been destroyed by the local authority. The seller argued that the buyersinability to restore the eggs was fatal to his right to rescind the contract.

The court said, despite the basic prerequisite that latently defective goods must be returned, the Actio Redhibitoria maynevertheless apply even where goods cannot be returned if this is because they have been destroyed due to the latent defects andwithout fault on the part of the purchaser . . .

The Actio quanti minoris (action for reduction of the purchase price) is instituted when the latent defect is not so material as torender the article completely useless. Alternatively, the purchaser might opt not to rescind the contract and have the purchaseprice reduced in circumstances in which if he had so desired he could have cancelled the agreement on account of the gravity orseriousness of the defect. Under Actio quanti minoris , the defect however affects the value of the article. The purchaser keepsthe article but claims a price reduction which is the difference between the purchase price and the actual value of the article.

Aedilitian remedies are available to the seller only in cases where the thing sold has latent defects. Depending on thecircumstances they offer him only cancellations or a price reduction. However ordinary damages cannot be claimed in the caseof latent defects except in three cases (and where ordinary damages are awarded for latent defects, they are given in addition tothe Aedilitian remedies) which are as follows:

(a) where the seller acted fraudulently by not disclosing to the purchaser the existence of a latent defect of which he was aware.This is not simply withholding information, the intention of the seller is to defraud the purchaser.

(b) where the seller is the manufacturer of the thing sold or a dealer who publicises his expert knowledge and skills regardingthe article he may also be held liable ex empto for damages.

In Odendaal v Bethlehem Romery (1954) the purchaser bought livestock feed form a dealer. The dealer dealt almost exclusivelyin stock feeds. The feed was infested with a particular germ, but both parties were unaware of this. After the purchaser had fedthe feed to his stock, thirteen head of cattle died. The seller was held liable for damages because he was a dealer with expertknowledge regarding that which was sold.

(c) where the seller gives an express warranty against latent defects, he will be liable for damages if there should be a defect in

the thing purchased.

9 (a) The procedure for appointing and removing directors is invariably governed by the companys articles of association. If TableA has been adopted, articles 90-98 specify the formalities for electing directors and in terms of article 96 the directors shallhave power at any time and from time to time to appoint any person to be a director, either to fill a casual vacancy or as anaddition to the existing directors. At a Board meeting Ngonidzashe would tender his resignation and Kudzai, the CompanySecretary, would note the resignation in the minutes. At the same time the directors would decide at a Board meeting toinvite Bonzo to fill the seat vacated by Ngonidzashe and this decision would be recorded in the minutes. The Secretary woulddelete Ngonidzashes name and details from the Register of Directors and Secretaries and insert Bonzos particulars in termsof s.187 of the Companies Act. Kudzai, the Secretary, would be obliged to complete a CR14 form advising the Registrar of Companies within one month of the change. At the same time the companys letterheads and other printed stationery shouldreflect the new changes.

The Secretary should send a letter to Bonzo, the new board member congratulating him upon his appointment and enclosinga copy of the companys memorandum and articles of association. The new director should also be reminded that he isrequired to give notice of interest that he may have in contracts involving the company as per s.186 of the Act. If the newdirector is to be signatory on one or more of the companys bank accounts, his details and specimen signatures should besent to the bank.

(b) Tamai, a creditor to Dryland Products (Pvt) Ltd, has instituted a creditors petition for winding up the company due to DrylandProducts (Pvt) Ltds inability to pay its debts. Tamai is owed $2 000 000.00 by the company. Section 205 as read withs.206 (f) of the Companies Act, Chapter 24:03 defines the concept of inability to pay debts. A company shall be deemed tobe unable to pay its debts if a creditor by cession or otherwise to whom the company is indebted in a sum exceeding onehundred dollars then due has served on the company a demand requiring it to pay the sum so due by leaving the demandat its registered office and if the company has for three weeks thereafter neglected to pay the sum or to secure or compoundfor it to the reasonable satisfaction of the creditor. Alternatively a company may be deemed to be unable to pay its debts if it is proved to the satisfaction of the court that the company is unable to pay its debts and in determining whether a companyis unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.

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It is clear from the facts of the case that Dryland Products (Pvt) Ltd is unable to pay its debts. By way of alternative actionthe court may grant a provisional management order in respect of the company in terms of s.300 of the Act. In thecircumstances of the case it should be possible to establish that by reason of mismanagement of the two directors, Mujereand Nhidza the company is unable to pay its debts and has not become or is prevented from becoming a successful concernand that there is a reasonable probability that if the company is placed under judicial management it will be enabled to payits debts or meet its obligations and become a successful concern.

On the return day fixed in the provisional judicial management order (which shall not be less than sixty days from the date

of the grant of the provisional judicial management order) and after considering the opinions and wishes of the creditors,members and other relevant stakeholders, the report of the provisional judicial manager, the report of the Master and Registrar,the court may grant a final judicial management order.

A final judicial manager shall subject to the memorandum and articles of the company take over from the provisional judicialmanager and assume management of the company. He would manage the company subject to any order of the court insuch manner as he may consider most economic and most likely to promote the interests of the members and creditors of the company.

10 (a) An offer is an unconditional declaration by the offeror of his intention to conclude a contract and the offer must comply withthe following requirements. It must be:

(a) clear and unambiguous(b) complete(c) communicated to the offeree(d) made with the intention that it will serve as an offer that it may be accepted and that a valid contract will result

therefrom.

From our case law it is clear that an advertisement (as in this case) is merely an invitation to do business (to treat) and nota firm offer.

In Crawley v R (1909) Smith J ruled as follows:

the mere fact that a tradesman advertises the price at which he sells goods, does not appear to me to be an offer toany member of the public to enter the shop and purchase goods nor do I think that a contract is constituted when anymember of the public comes in and tenders the price mentioned in the advertisement. It seems to me to amount simplyto an announcement of his intention to sell at the price he advertises . . ..

It is clear from the facts of the case that Adolf is the offeror and Egoli Mines Limited is the offeree who is at liberty either to

accept or reject the offer. If an offer is made by post and acceptance also takes place postally a contract comes into being atthe place where and at the time when the letter of acceptance is posted.

In the case of Cape Explosives Works Ltd v SA Oil and Fat Industries Ltd (1921) the court ruled that the expedition theoryis to be applied in the case of postal contracts

where in the ordinary course the post office is used as the channel of communication, and a written offer is made, theoffer becomes a contract on the posting of the letter of acceptance.

Kotze J based his judgment on practical considerations because the applications of the expedition theory gives rise to fewerproblems. Where an effective postal system exists, there is a reasonable level of certainty that a letter which is properly postedwill reach its destination.

The decision that the expedition theory applies to postal contracts was ratified by the appeal court in Kergeulen Sealing andWhaling Company Ltd v CIR (1939) and is now generally accepted as the ruling principle in our law. It is now clear thatwith postal contracts, the expedition theory applies and the contract comes into existence where and when the letter of acceptance is posted unless the offeror expressly states that he required notice of the acceptance.

It is also settled law that the offer may therefore not be withdrawn after the letter of acceptance has been posted even if theofferor has no knowledge of the posting ( A to Z Bazaars v Minister of Agriculture (1942).

By processing Adolfs application and posting him a share certificate on Wednesday April 3rd it means that there is a completeand binding contract between the parties. Adolfs purported revocation of the offer is of no force or effect because the contractis already a done deal. Equally Egoli Mines purported withdrawal of their acceptance of Adolfs offer is null and void. Insummary it can be said that since Adolfs offer was validly accepted by Egoli Mines Ltd there is a binding contract betweenthe two parties. Adolf is entitled to keep his shares and he has become a member of Egoli Mines Limited whose share pricehas been considerably boosted by the discovery of vast gold reserves along the Great Dyke region of North-West Zimbabwe.

(b) The Legal Age of Majority Act, 1982 conferred majority status on all Zimbabweans above the age of eighteen years. Africanwomen who were hitherto perpetual minors acquired majority status at the age of eighteen years. As a result all Africanwomen older than eighteen years of age are emancipated from the authority of guardians (like their male counterparts). InKatekwe v Muchabaiwa (1984) the Supreme Court ruled that as a result of the Legal Age of Majority Act upon attainingeighteen years of age an African woman acquires locus standi in judicio (contractual capacity).

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Whilst it is clear that the new post-independence legislation gives Elsie the legal competence to acquire rights and incurobligations even if Elsie had been an unassisted minor she would still probably be bound by the contract on the basis thatshe was tacitly emancipated (her involvement in business etc).

Elsie might want to argue that she is not liable on the loan because the agreement is vague and open ended. It was verballyagreed that she could liquidate the sum in instalments if you like, as and when you think you can . . ..

In our law an agreement which is so vague that its meaning cannot be ascertained by a court is void ab initio (from the initialinstance). In Baretta v Baretta (1924) a contract between parties by which a debt was acknowledged and certain propertypledged, provided that the debtor thereby undertakes to pay off a substantial sum every year. The court said that thisstipulation was too vague to be enforced in law.

On the other hand the mere fact that a contract appears to be incomplete or uncertain does not render it void for vaguenessif its meaning can in fact, be determined by a court on the evidence before it. In Anegate v Muckulals Estate (1954) A wasemployed by his uncle who agreed to pay him something, sometime for his services. The court held that the language of the contract was not so much vague as silent and the amount of remuneration could easily be determined by having recourseto the ordinary rules governing implication of terms into a contract. There was therefore in this case an implied term requiringthe uncle to pay a reasonable remuneration.

In any case even if the court were to determine that the contract was void for vagueness Elsie would still be under anobligation to make restitution to the other party to the extent to which she has been enriched. The idea is to avoid a situationof unjust enrichment and therefore the capital sum of $400 000.00 is recoverable.

As for Infidels claim, the agreement giving rise to it is immoral and therefore contrary to public policy. An unlawful agreementis unenforceable at law, the principle being expressed in the maxim ex turpi causa non oritur actio (no action arises from abase cause). In Pietzsch v Thompson (1972), P claimed the return of certain gifts from T in pursuance of their agreementto marry each other after Ts divorce from her husband. The court said that the agreement was contrary to public policy andtherefore void.

And in Friedman v Harris (1928) H, a married man was sued by F a spinster for damages for seduction. H agreed to pay F1000.00 in settlement. Subsequently, they agreed that if F would repay what was left of the 1000.00, H would proceedwith a divorce action and subsequently marry F. F paid H 800.00 in pursuance of this agreement but H did not divorcehis wife. The court held that the agreement was void.

In conclusion it can be said that whilst the money owed by Elsie to Shasha is recoverable she has no liability towards Infidelin view of the fact that the agreement is void on account of public policy.

11 (a) A director owes the company a number of common law and statutory obligations.The duties of a director can conveniently and usefully be broken down into the following categories.

(1) fiduciary duties(2) the duty to exercise powers bona fide in the companys interest(3) the duty not to make secret profits(4) the duty not to have personal interest conflicting with those of the company(5) the duty to disclose(6) the duty of care and skill(7) the duty to act intra vires the companys statutes (memorandum and articles of association)

At common law a director is subject to certain fiduciary duties which require him to exercise his powers bona fide and forthe benefit of the company. A person possesses fiduciary duties when he is in a position of trust or occupying a position of power and confidence with respect to another person such that he is obliged by law to act solely in the interest of that other

persons rights which he is to protect. It cannot be doubted that directors occupy a position of trust or as is usually stated, afiduciary position towards the company similar in some respects to that of an agent entrusted with the control andmanagement of the money or effects of another person.

The fiduciary duties are owed to the company and to the company alone and not necessarily to individual shareholders(Pergamon Press Ltd v Maxwell).

The fiduciary duty of directors in respect of the shareholders is akin to the duty owed by the trustees to their beneficiaries andthus the fiduciary duty can conveniently be broken down into two parts:

(1) the directors must act bona fide for the benefit of the company and not for an ulterior motive and

(2) the director must refrain from embarking upon an act which will lead to a conflict of his interests with those of thecompany.

Roodpoort Limited Main Rep v Du Toit (1928)

An important consequence of the relationship between a director and his company is the directors duty to exhibit utmostgood faith in his dealings with the company. He must refrain from placing himself in a position where his own interests clashwith those of the company and he must never take an improper advantage of his position by acquiring for himself assets oropportunities that rightly belong to the company.

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In Robinson v Randfontein Estates Gold Mining Company Ltd (1921).

The Managing Director of a company using information he acquired in the course of his official duties bought immovableproperty worth 60 000, which the company was interested in acquiring and using a front immediately resold it to thecompany for 275 000.000. The court held that the plaintiff company was entitled to claim from the defendant the profitof 215 000.00 made by him on this transaction. Innes CJ said

where one man stands to another in a position of confidence involving a duty to protect the interests of that other he isnot allowed to make a secret profit at the others expense or place himself in a position where his interests conflict withhis duty

In Magnus Diamond Mining Syndicate v Macdonald and Hawthorne (1909), the defendant while directors and managers of a company acquired information as to the value of certain diamondiferous property. They thereupon purchased the propertyin competition with the company without disclosing their intention to the company. The court decided that the defendantswere obliged to transfer the property to the company and to account to it for profits already received. The court made thefollowing observation that it is the duty of all agents including directors of companies to conduct the affairs of their principalin the interests of the principal and not for their own benefit.

By trading with Tatco through another company Madhiri (Pvt) Ltd Mr Svotwai has involved himself in a conflict of interest.He has unlawfully placed his personal interests above those of Tatco. He has probably made illicit use of personal informationwhich he acquired in his capacity as Managing Director and has made secret profits as well. By defrauding the companyand giving huge trade discounts to Madhiri (Pvt) Ltd in an irregular manner he has not exhibited utmost good faith to Tatco(Pvt) Ltd, his principal. Neither has he acted with due diligence, care and skill that is required to manage the company.

One of the major statutory duties of the directors is the duty to disclose his interest in contracts (where he has either abeneficial direct or indirect interest) between a director and his company. Section 186(1) of the Companies Act Chapter24:03 says that it shall be the duty of a director of a company who is in any way whether directly or indirectly interested ina contract or proposed contract with the company to declare the nature and full extent of his interest at a meeting of thedirectors of the company.

In the case of Aberdeen Railway Company v Blaikie Bros (1854) the defendant company entered into a contract to purchasea quantity of chairs from the plaintiff partnership. At the time that the contract was concluded, a director of the companywas a member of the partnership. The court held that the company was entitled to avoid the contract. In this case Svotwaihas been in flagrant breach of his common law and statutory duties.

(b) A creditor with a liquidated claim against Tatco (Pvt) Ltd in liquidation may prove a claim at a meeting of creditors. The claimmust be proved by affidavit in the prescribed form and the affidavit shall specify the nature and particular of the claim.

The affidavit and any supporting documents are lodged at the Masters office at least 48 hours before the advertised time of the meeting. The presiding officer examines the documents and either admits or rejects the claim. If the claim is confirmedcreditors will usually be entitled to some payment (unless there are insufficient funds available).

Secured and preferent creditors receive payment before concurrent creditors who would usually receive a pro rata share of the free residue.

(c) In terms of the common law, the liquidators have a claim against Svotwai for misfeasance (misapplication and or fraudulentapplication of company assets). The holiday home, the small private aeroplane and any other assets he may have can be

judicially attached in order to satisfy the companys claim against him. By way of statutory remedy, in terms of s.318 of theCompanies Act, Chapter 24:03 the law has provided relief as follows:

(1) If at any time it appears that any business of a company was being carried on:

(a) recklessly or

(b) with gross negligence or

(c) with intent to defraud any person or for any fraudulent purpose, the court may, on the application of the master orliquidator or judicial manager or any creditor of or contributory to the company, if it thinks it proper to do so declarethat any of the past or present directors of the company or any other persons who were knowingly parties to thecarrying on of the business in the manner or circumstances aforesaid shall be personally responsible withoutlimitation of liability for all or any of the debts or other liabilities of the company as the court may direct.

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(b) The central issue at stake in this case is whether or not the employer, Tender Meat Supplies (Pvt) Ltd is liable for the delictof their employee, Lucky. In our law, an employer is as a rule liable to third parties for delicts committed by the employeewithin the scope of his employment.

In order to hold the employer liable for the delicts of his employee the following requirements must be present:

(a) the agent should be a servant and not an independent contractor. He should be subject to the employers control anddirection as to what to do and the manner in which he carries out his work. If the employer has a right to issuecommands to the employee and to exercise control over him it will serve as a prima facie proof of the existence of acontract in which the agent is a servant rather than an independent contractor.

(b) the acts should have been committed when the servant was within the scope of his employment. It is not sufficientthat the employee committed an act during his ordinary working hours. If he does something entirely for his ownpurposes or benefit which doesnt form part of his duties as a servant, then the master would not be held liable. Inother words the master could easily repudiate liability where the agent is on a frolic of his own.

Whether an action falls in the course of the employees service or not is a question of fact and depends on the particularcircumstances of each case.

If the employee is acting within the scope of his employment whether during or after working hours the employer will be liablefor any delict committed.

In Hendricks v Cutting (1947), the employee was a lorry driver. While he was doing his work he stopped at a filling stationfor fuel. He lit a cigarette, causing a fire in which the pump attendant was injured and the employer was held liable.

And in Minister of Justice v Khoza (1966) two police constables were going about their work. They were, inter alia , guardingprisoners, one of the constables aimed a pistol at the other in jest, the pistol went off and the second constable was injured.The employer was held liable.

In this case Lucky deviated from his route by some twenty kilometres in order to spend some time with his girlfriend, Zodwaand on his way back to work he was involved in an accident. Can it be said that the deviation was so serious as to amountto the fact that Lucky was now on a frolic of his own? It has been held in some cases that the fact that the servant deviatesfrom the course of employment will not necessarily mean that there is no vicarious liability. Sometimes, considerations of social justice have led courts to adopt the approach that the degree of deviation from the masters instructions has to be to amajor extent before they will decide that the servant was not acting in the course of his employment.

For example, where the employee is partially promoting the interests of the employer and partially his own, the employer willalso be liable.

In Feldman v Mall (1945) the employee had to deliver goods and return immediately to his place of work. On the way backhe deviated from the route to partake of a drink with his friends. Later on his way back to his place of work, he knockeddown and killed someone. The court decided that he had left his work only partially to promote his interests. He was,however, still promoting the interests of the employer because he retained control of the vehicle and took it back to work later.The employer was liable.

In the light of this and other cases Munyama stands a reasonable chance of being able to hold Tender Meat Suppliers (Pvt)Ltd vicariously liable for the damages caused to his car on account of the negligence of their employee, Lucky.

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Part 2 Examination Paper 2.2(ZWE)Corporate and Business Law (Zimbabwe) December 2002 Marking Scheme

1 The emphasis is on legislation as the primary and most authoritative source of law in Zimbabwe.

7 10 marks Answers in this band will provide a full analysis of the question area demonstrating a clear understanding of legislation as the primary source of law in Zimbabwe. An appreciation of the distinction between primary legislationon the one hand and delegated legislation on the other hand is imperative.

4 6 marks A lukewarm answer which is rather deficient in relation to the process that leads to the creation of both acts of Parliament and delegated legislation.

0 3 marks A rather poor answer in which the concept of legislation is hardly understood.

2 In order to answer this question adequately it is important for candidates to appreciate the nature of contracts and in particularfactors that vitiate agreements:

7 10 marks Top band marks will be awarded to candidates who comprehensively discuss factors that vitiate contracts likemistake, misrepresentation, duress and undue influence. In the majority of the cases the agreement becomesvoidable at the instance of the weaker party. It would be useful to cite relevant case law.

4 6 marks An average answer which does not fully explain the nature of voidable agreements.

0 3 marks An indifferent answer which is grossly inadequate.

3 7 10 marks A full analysis of the concept of agency and how such contracts can be terminated. Appropriate case law has tobe cited.

4 6 marks Omissions here and there which are not of a major character.

0 3 marks An answer which does not adequately cover the area of the law of agency.

4 The question is centred on the principle of majority control (the Foss v Harbottle rule) and the context within which it operates inour law.

7 10 marks A full discussion of the principle of majority control and the exceptions to the rule (both common law and statutory)is essential and citation of relevant case law is a must.

4 6 marks A rather incoherent answer in which some aspects of the principle of majority control are not properly understood.

0 3 marks An unimpressive answer which is full of omissions.

5 The question relates to the rules and regulations (both common and statutory) which govern the payment of dividends.

7 10 marks A full explanation of the law that regulates the payment of dividends and citation of both the common law (mostlycases) and statutory sources is a must.

4 6 marks An answer which emphasises one aspect (e.g common law) without looking at the other aspect (say statutoryprovisions).

0 3 marks A rather inaccurate answer which is deficient in many respects.

6 Although this is largely one topic, the two aspects (a) and (b) can be treated individually as stand-alone topics.

(a) 3 5 marks A full and comprehensive explanation of the concept of rehabilitation and its legal effects. It is important tomake references to the Insolvency Act (Chapter 6:04).

0 2 marks An inadequate explanation of the term rehabilitation and the legal effects thereof.

(b) 3 5 marks A comprehensive inventory of the circumstances under which an insolvent person can be rehabilitated.

0 2 marks Very little or limited knowledge of the area of rehabilitation in insolvency law.

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7 The two stand alone sub-questions relate to some of the basic obligations of the employer towards his employee.

(a) to provide the employee with work

3 5 marks Answers in this bracket will show an appreciation of the general rule in our law which says that an employeris not legally bound to provide work for the employee as long as he is paying the employees wages. Howeverthere are a number of notable exceptions to this rule which must be mentioned.

0 2 marks An indifferent answer in which the relevant principle has hardly been understood.

(b) Payment of Wages

3 5 marks Answers in this bracket will show evidence of the fact that candidates appreciate the primacy of the obligationby the employer to pay wages.

0 2 marks An unsatisfactory answer.

8 The question pertains to the common law remedies that are available to the buyer in the event that the merchandise (merx) islatently defective.

7 10 marks Answers in this band should adequately define the concept of latent defects and the two separate remediesavailable ( Actio Redhibitoria or Actio Quanti Minoris ) to the buyer depending upon the nature and extent of thedefect. The answer should comprehensively define when each remedy is available and what it entails in practicalterms. It is imperative to cite relevant case law.

4 6 marks A rather average answer where the relevant principles are not clearly spelt out and there is no supporting case law.

0 3 marks A very unbalanced answer. Focusing only on one aspect of the question and completely ignoring the others or ananswer which shows little understanding of the subject matter of the question.

9 The two subsections are stand alone questions with each one attracting 10 marks.

(a) 7 10 marks Candidates should have knowledge of the procedures involved in appointing and removing directors from theBoard. The companys memorandum and articles of association should be used as the starting point. Marksin this band would show an appreciation of some practical aspects of Company Secretarial Practice (e.g whatthe Company Secretary is expected to do whenever there is a Board vacancy).

4 6 marks An average answer which is short on specifics.0 3 marks A rather poor answer in which the candidate displays lack of knowledge of the subject.

(b) 7 10 marks Answers in this mark range would display a thorough knowledge of the alternatives to winding up and inparticular, judicial management. It is important to describe the procedure to be followed in effecting a judicialmanagement order and a citation of the relevant statutory provisions is a must.

4 6 marks A lukewarm answer which does not make reference to statutory provisions.

0 3 marks An indifferent answer which is vague and inaccurate.

10 (a) 7 10 marks Answers in this bracket would manifest a correct understanding of the elementary issues involved in makingcontracts namely, offer and acceptance, the use of post and telephonic communication and the issue of revocation of an offer. Relevant case law is absolutely a must and drawing the correct conclusions isimportant.

4 6 marks An average answer which omits some of the critical aspects of the question and case law might even bewrongly cited.

0 3 marks A unbalanced answer demonstrating no real understanding of the fundamental legal issues at stake.

(b) 7 10 marks Answers in this bracket will show a clear grasp of the fundamental legal principles involved such ascontractual capacity, vague agreements and immoral and/or illegal agreements. Both statutory and commonlaw (case law) sources have to be cited.

4 6 marks An average answer in which some of the legal issues and the context within which they operate are notproperly understood.

0 3 marks A vague answer where the candidate clearly does not understand what the question is all about.

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11 The question has been split into three parts with section (a) attracting the bulk of the marks.

(a) 10 14 marks Answers in this band will comprehensively discuss the common law and statutory duties of directors.Critically it is important to discuss the concept of fiduciary duties and how Mr Svotwai has violated thisobligation by placing his personal interests above those of his principal, Tatco (Pvt) Ltd. In the light of theManaging Directors flagrant violation of the obligation of utmost good faith which he owes his principal itis important to discuss the extent and nature of remedies that are available to the Principal. Case law mustbe cited in order to have a complete and meaningful answer.

5 9 marks An average answer which omits some of the essential elements of the concept of fiduciary duties. Case lawis not adequately cited and where it is cited, it is not incisive enough.

0 4 marks An unbalanced answer demonstrating no real understanding of the nature and demands of the question.

(b) 2 3 marks The general formalities which creditors would have to follow in order to recover money from a company thatis in liquidation.

0 1 mark Irrelevant or inadequate information in relation to the problem area.

(c) 2 3 marks It is important to refer to the common law remedy of misfeasance which the liquidators can have recourseto in order to recover money personally from an errant director. The statutory remedy provided under s.318of the Companies Act, Chapter 24:03 must also be mentioned.

0 1 mark A poor answer in which both the common law and statutory law provisions relating to the subject matterare unknown.

12 (a) 7 10 marks Marks in this band would be awarded for an answer that comprehensively discusses the duties of partnersin their entirety. Shumba is in breach of a number of his common law obligations towards his partner,Mhofu and it is important to define the whole range of options available to Mhofu by way of judicial relief such as damages and ultimately a dissolution of the partnership. This area of the law is replete with caselaw and it is absolutely important to cite relevant case law.

In the light of Mhofus deep sense of grievance over the conduct of the partnerships affairs, there are anumber of sensible options available to him and accordingly such advice must be given to him.

4 6 marks An average answer with omissions here and there. Relevant case law has not been cited.

0 3 marks A poor answer which reflects a fundamental lack of proper insights into the problem.

(b) 7 10 marks Answers will provide a full analysis of the question area, demonstrating an understanding of the concept of vicarious liability and the legal context within which it operates in our law. It is important to be able todistinguish between an agent who is an independent contractor and one who is a servant for purposes of establishing the principals vicarious liability for delicts that have been committed by the agent. Appropriatecase law must be cited in the light of the above discussion.

4 6 marks Answers in this bracket may show a rudimentary understanding of the subject matter but would lack thedetailed knowledge of answers in the higher bracket. Alternatively the answers may be unbalanced instructure and content or miss out on important issues.

0 3 marks Vague and inaccurate. At the lower end of the band, candidates would show very little knowledge of whatthe question is all about.